tag:blogger.com,1999:blog-1859804024232719882017-07-19T18:16:06.444+05:30ImpressionsSome thoughts. Some ideas. Some suggestions. Some observations.Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.comBlogger104125tag:blogger.com,1999:blog-185980402423271988.post-44505509518462995232017-03-25T19:22:00.000+05:302017-03-25T19:22:02.514+05:30Leaked! Secret letter from Narendra Modi to Rahul Gandhi after the recent elections<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal">A secret letter written by PM Narendra Modi to Congress VP Rahul Gandhi soon after the recent five state elections has been leaked online. Here is the full text of the letter:<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">13</span><sup style="font-family: &quot;Lucida Handwriting&quot;;">th</sup><span style="font-family: &quot;lucida handwriting&quot;;">March 2017</span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">Dear Rahul ji,<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">The elections are over, and they have gone largely as per plan. Your efforts were invaluable in Uttar Pradesh. Akhilesh <i>beta</i>never realized that "Hand" is used to stop a "Bicycle", not to accelerate it ! But he is still young, will learn over time.&nbsp;In fact your efforts in U.P. were so effective that there was also a strong rub-off on neighboring Uttarakhand. A big thank you for this! We are also very happy with what happened in Manipur, where we were a big Zero just five years ago! There was a slight problem in Goa, but I admit it was all our own fault. Parrikar ji was not there, and our people were busy fighting amongst themselves. However we have fixed that problem now, so don’t worry. Meanwhile, you are free to imagine that it is the Congress who won the mandate in Goa and Manipur. Victory - after all - is just a <a href="http://indiatoday.intoday.in/story/rahul-gandhi-mocks-at-poor-says-poverty-is-just-a-state-of-mind/1/298206.html" target="_blank">state of mind</a>.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">We are however not at all happy with what happened in Punjab. This is a serious matter. You should have campaigned more vigorously in Punjab instead of leaving everything to Amarinder Singh ji. It seems you were focused only on Uttar Pradesh. This is sheer negligence. Because of this, deadlines for Project “Congress-mukt Bharat” will now have to be pushed forward to 2022. But it is okay this one last time, we are letting you off with just a warning. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">You are now free to resume your foreign holiday. This is a good time to visit Bangkok. It always is! You can plan for a visit to Europe too, but don’t, even by mistake, go to the U.S.! I hope you remember <a href="http://zeenews.india.com/news/india/rahul-gandhi-was-caught-in-us-with-drugs-vajpayee-got-him-released-swamy_1634107.html" target="_blank">what happened in 2001</a>? Luckily Atalji was able to help you that time, but this time we may not be able to do anything. Trump Uncle is very strict.&nbsp;</span><span style="font-family: &quot;lucida handwriting&quot;;">He may suspect you are there to sell kitchen utensils, <a href="http://www.opindia.com/2017/03/obama-using-jaunpur-products-how-rahul-gandhi-is-redefining-entrepreneurship/" target="_blank">Made in Jaunpur</a>, of course. So please take care.</span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">And yes, don’t forget to return for Karnataka elections next year.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">Happy holidays!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;lucida handwriting&quot;;">Warm Regards, <o:p></o:p></span></div><span style="font-family: &quot;lucida handwriting&quot;; font-size: 11.0pt; line-height: 115%;"><br /></span> <span style="font-family: &quot;lucida handwriting&quot;; font-size: 11.0pt; line-height: 115%;">Narendra Modi</span><br /><span style="font-family: &quot;lucida handwriting&quot;; font-size: 11.0pt; line-height: 115%;"><br /></span></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-50461749441338747582017-03-12T13:04:00.000+05:302017-03-12T13:04:17.919+05:30What we learn from recent elections in India<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;">In an extraordinary move one fine evening in November last year, Prime Minister Narendra Modi announced sudden withdrawal of 86% of India’s currency in circulation, in what he termed as a crackdown on black money. In a predominantly cash based economy like India, it was an unprecedented move and has no parallel anywhere in the world. While the last word on “<a href="https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation" target="_blank">notebandi</a>” has not been said yet, several elections – both local bodies and states - since then confirm voters have not been averse to the action. This is in sharp contrast to what was shown incessantly on electronic media during those eventful days of acute currency shortages. Besides a verdict on demonetization, here are some takeaways from recent elections in the country not just in the five states that went to polls last month, but elsewhere as well.<o:p></o:p><br /><br /></div><div class="MsoNormal" style="text-align: justify;"><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-d3Xomv4Qlp0/WMTjkVCaViI/AAAAAAAAG4w/sljLAlY43dUyMGR1dlgHaQeh-RrNN6-mgCLcB/s1600/20140815_095209.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="https://4.bp.blogspot.com/-d3Xomv4Qlp0/WMTjkVCaViI/AAAAAAAAG4w/sljLAlY43dUyMGR1dlgHaQeh-RrNN6-mgCLcB/s400/20140815_095209.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Democracy is flourishing in India as voters demand performance &amp; accountability</td></tr></tbody></table><i><b>The mainstream media has no touch with reality. </b></i>I wonder how they justify the crores they get as salary. For example, the sheer scale of BJP’s election victory in Uttar Pradesh is mindboggling. Yet, throughout the election campaign, the media painted a picture of a keen contest between the “<i>UP ke ladke</i>” Vs. Narendra Modi, with Mayawati’s BSP thrown in for some additional spice. The media narrative portrayed a largely equal fight, or occasionally an edge to the BJP depending on whom you believed. As if to justify prior coverage, the exit polls also reflected similar trends, with BJP a bit ahead of the rest but not too much. But it all fell flat when the results were declared. This is true not just for U.P. but elsewhere as well. Recall that the non-stop coverage for more than a month of the poor “suffering” in bank queues (some even died!) also turned out to be top class fiction. Clearly, if you are watching too much TV, especially the newsroom debates &amp; “expert” analyses, you are wasting your time. Go, get a life.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><i><br /></i></div><div class="MsoNormal" style="text-align: justify;"><div style="text-align: right;"></div><b><i>There is no substitute for hard work</i>.</b> Narendra Modi’s charisma sits on top of several decades of solid ground level work by RSS &amp; several of its affiliate organizations in the remotest corners of the country. You cannot build a sustainable electoral model without some real groundwork &amp; voter connect at the grassroots. Mulayam Singh Yadav built Samajwadi Party from scratch. He has spent his whole life in the rough &amp; tumble of U.P.’s realpolitik, connecting with people, building relations and nurturing the party to what it is. In the 2012 U.P. State Assembly elections, people voted for Samajwadi Party with “Netaji” in mind. But it was Akhilesh who was made the CM. You can inherit party posts but not the personal touch &amp; rapport with the people. You have to build that yourself. Governing a State &amp; showcasing a couple of projects is one thing, having a grassroots level connect with the people that makes them vote for you again &amp; again is another. It is no surprise that cutting across party lines, one can see that most second generation politicians are failures.<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-fT1ouc8xxr8/WMTeHf98grI/AAAAAAAAG4g/fc4vXl09wPA9tIVIp9mcq2Yi-JPeJHUogCEw/s1600/Screenshot_Kejriwal.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="238" src="https://4.bp.blogspot.com/-fT1ouc8xxr8/WMTeHf98grI/AAAAAAAAG4g/fc4vXl09wPA9tIVIp9mcq2Yi-JPeJHUogCEw/s400/Screenshot_Kejriwal.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">There are no shortcuts to success, no substitute for real groundwork and people connect</td></tr></tbody></table></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><i><b>Leadership matters.</b> </i>In Uttar Pradesh,<i> </i>Narendra Modi staked his personal reputation at risk and led the battle from the front. There is no doubt that BJP could not have pulled off such a huge success if Modi had stayed away from campaigning or only made token appearances. Ideology has ceased to matter. Choosing your party is no longer a question of ideology you subscribe to. All parties call themselves socialist and secular. Nobody reads party manifestos. Even freebies have ceased to matter, if only because everyone promises a bountiful of them, so the factor gets neutralized. People want forceful, decisive leadership.<i></i></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><i><br /></i></div><div class="MsoNormal" style="text-align: justify;"><i><b>There are no vote banks.</b> </i>The “secular” narrative is dead.<i> </i>Sixty five percent of India’s population is below the age of 35. The median age of an Indian is 27.6 years. The generation which saw Partition has passed away. To a large section of today’s voters, even the Ayodhya demolition is “history”. And voters are no longer swayed by what happened in history. The BJP has successfully shed its “communal” label. Even Muslim attitudes towards BJP are changing. But like an Ostrich who buries its head in the sand, the old generation “secular” politicians - most of them past their retirement age - refuse to see this reality. Even the caste factor is overrated. Just because one can generate caste-wise statistics and blabber some nonsense, it does not follow that voters who cast their vote ‘vote their caste’. Even where a correlation exists between the caste of the electorate &amp; the elected, it does not prove causation. I have not seen a single survey or opinion poll which asked the voters <i>why</i>they voted for a candidate they did, and majority of the voters pointed to caste as the driving factor. No wonder sand it slipping from under the feet of parties who thrived on such narrow agendas. In an article three years back, I called such parties “<a href="http://chandragupta-acharya.blogspot.in/2014/01/india-politics-elections.html" target="_blank">Dodos of Indian Politics</a>”. &nbsp;</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><i><br /></i></div><div class="MsoNormal" style="text-align: justify;"><i><b>Voters have become demanding.</b> </i>Television &amp; radio has reached every home. Internet penetration is increasing rapidly. Literacy has improved significantly over the years. People are much more aware of what’s happening in &amp; around them. You just can’t take them for a ride anymore with empty promises. The voters have become demanding, and politicians who fail to deliver get thrown out. This is repeatedly getting proved one election after another, be it in Nitish Kumar retaining Bihar, or the Akalis losing Punjab.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Despite its recent spate of successes, even BJP cannot rest on its laurels. It will have to deliver genuine improvements to the lives of the people. Otherwise the same fate awaits them.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-47806633029697557972017-02-26T13:54:00.000+05:302017-02-26T13:54:36.166+05:30Understanding Bank NPAs<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;"><i>“Reserve Bank extends EMI Holiday”</i> screamed the newspaper early in the morning of 22<sup>nd</sup> November 2016, amidst those chaotic days of Rs.500 &amp; Rs.1000 "demonetization". <i>“RBI allows both individuals and firms with loans upto Rs. 1 crore an additional grace period of 60 days to repay dues”</i>, said the paper.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><i><br /></i><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-47HJG_n2PUA/WLKN6gVr33I/AAAAAAAAG2k/PgN2rxwB3dgtoiTCfZ407j533u9ocMZ6ACLcB/s1600/Screenshot_20170226-124323%257E2.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://4.bp.blogspot.com/-47HJG_n2PUA/WLKN6gVr33I/AAAAAAAAG2k/PgN2rxwB3dgtoiTCfZ407j533u9ocMZ6ACLcB/s400/Screenshot_20170226-124323%257E2.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">...except that there was never any EMI holiday</td></tr></tbody></table><i><br /></i></div><div class="MsoNormal" style="text-align: justify;"><i>“Demonetization: RBI gives small borrowers 60 extra days to repay credit”</i>, said another - a leading financial daily, <i>“…small borrowers who have been facing the brunt of demonetization, would get an additional 60 days to repay their credit, including agriculture and housing loans”</i>.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Similar reports were carried by most newspapers that day, and repeated <i>ad nauseum</i> by television channels for several days thereafter. There was however one small problem – the news was completely wrong.<br /><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-_3MdFSzuxBM/WLKPDOlv3nI/AAAAAAAAG20/h03oHxkHW2sL8ViT5GrWeXjhGNLLMduJwCEw/s1600/Screenshot_20170226-132657%257E2.png" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://4.bp.blogspot.com/-_3MdFSzuxBM/WLKPDOlv3nI/AAAAAAAAG20/h03oHxkHW2sL8ViT5GrWeXjhGNLLMduJwCEw/s320/Screenshot_20170226-132657%257E2.png" width="237" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Most media houses wrongly reported the news</td></tr></tbody></table><br /></div><div class="MsoNormal" style="text-align: justify;"><b>What RBI had said</b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">What then had caused the press to report something like this, which wasn’t true at all? The answer to this lay in a circular issued by the Reserve Bank of India, put up on its website the previous day. The circular, titled “Relaxation in Prudential Norms”, said <i>“…it has been decided to provide an additional 60 days beyond what is applicable for the concerned regulated entity(RE) for recognition of a loan account as substandard in the following cases…”</i> and cited a wide gamut of loan accounts where this benefit will be applicable. Read the full circular <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10723&amp;Mode=0" target="_blank">here</a>.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The operative term here is <i>‘additional 60 days…for recognition of a loan account as substandard’</i> which was misinterpreted to mean borrowers getting an extra 60 days to repay their EMIs or other dues. In fact, the RBI circular clearly mentioned&nbsp;<i>“…this is a short-term deferment of classification…” </i>and that this <i>“…does not result in restructuring of the loans”</i>. Shorn of its jargon, this means there is no change in dates when the borrowers have to repay, but if they do not, banks can have an additional 60 days to do what they do when the borrowers do not repay.<br /><o:p></o:p><br /><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Understanding NPAs</b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">News reporters and financial journalists aside, I have seen even analysts tracking the banking sector struggle with these terms. When banks give loans, the loans appear on the asset side of a Balance Sheet. A repayment goes on to reduce that asset, while a fresh disbursement increases these assets. However, not all loans get fully repaid, and occasionally a customer defaults. This leads to a capital loss for the bank, as the assets have to be written off. To an extent, such losses are considered ‘normal’ in the banking business, and prudence requires that banks prepare for them well in advance. This is where ‘provisioning’ comes in. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Provisioning means banks booking an ‘expense’ entry in the Profit &amp; Loss account based on the expected losses arising from such defaults. Provisioning reduces reported profits of the bank and creates a capital buffer, which can be used when the losses actually occur. The amount of provisioning to be done is prescribed by the RBI, and depends on the ‘quality’ of the asset. The worse the quality, higher the provisioning, since lower are the chances you will ever recover your money.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Asset Classification </b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">This is where ‘Asset Classification’ comes in. RBI requires banks to classify all loans in four groups – Standard, Sub-standard, Doubtful and Loss. Initially, all loans start as ‘Standard’. Assets under the other three categories are collectively called “Non-Performing Assets” or NPAs. NPAs are loans where principal or interest has not been received for <b>more than 90 days beyond its due date</b>. The RBI defines ‘Sub-standard’ as an asset which has remained an NPA for a period less than or equal to 12 months. After 12 months as an NPA, the asset degrades to ‘Doubtful’. ‘Loss’ assets are assets where the bank feels there is no hope of recovery from the customer at all. If an EMI was due on 5<sup>th</sup> February 2017 and the customer failed to pay, the loan would become ‘sub-standard’ on 6<sup>th</sup>May 2017 (i.e. 90 days after this date). Twelve months after this date i.e. from 6<sup>th</sup> May 2018 onwards, the loan will be called a ‘Doubtful’ asset.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Note the following peculiarities in this:</div><div class="MsoNormal" style="text-align: justify;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-indent: -0.25in;">1.</span><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-indent: -0.25in;">A loan does not become an NPA immediately after default. For 90 days, it continues as a ‘Standard’ asset, though conventionally one is inclined to equate 'standard’ assets as those where the customers are repaying on time. Thus, given that demonetization was announced on the evening of 8</span><sup style="text-indent: -0.25in;">th</sup><span style="text-indent: -0.25in;"> November 2016, even an asset due on 9</span><sup style="text-indent: -0.25in;">th</sup><span style="text-indent: -0.25in;"> November and remaining in default would not become an NPA on 31</span><sup style="text-indent: -0.25in;">st</sup><span style="text-indent: -0.25in;"> December 2016. And this even without taking recourse to the extra 60 days provided by the above circular.</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-indent: -0.25in;">2.</span><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-indent: -0.25in;">There is no hard &amp; fast definition of a ‘Loss’ asset, it is based on a subjective assessment of the bank about the recoverability of the loan. In theory, a loan may continue to be classified as ‘Doubtful’ for several years after default, without ever being moved to ‘Loss’.</span></div><div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Why this classification matters is that the ‘provisioning’ banks are required to do – which, as we saw is an ‘expense’ and hits the bank’s profitability - depend on the category of the loan, progressively increasing as the loan moves down the quality lane from Sub-standard to Doubtful and Doubtful to Loss. RBI even requires banks to make provisioning on Standard assets.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Gross &amp; Net NPAs</b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">When banks declare their financial results, the 'Gross NPA’ and ‘Net NPA’ levels of the bank receive a lot of attention. The summation of assets under the category Sub-standard, Doubtful and Loss – are called the ‘Gross NPA’ of the bank. If you deduct the amount of provisioning done from the Gross NPA, the resultant figure is the ‘Net NPA’ of the bank. But we have seen above that provisioning is an arbitrary number – partly driven by a regulatory minimum, partly driven by the bank’s own discretion. This makes 'Net NPA’ also an arbitrary number. ‘Gross NPA’ however is a much more tangible number – it tells precisely the amount of loans overdue <i>by 90 days or more</i>. There is no subjectivity around it.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The NPA figures are often quoted in terms of percentages. When bank results are declared at the end of every quarter, analysts look at the ratios ‘Gross NPA %’ and ‘Net NPA %’ to determine the quality of bank's assets. Gross NPA % is calculated as ‘Gross NPA of the bank (as described earlier) divided by standard advances plus the gross NPAs’ of the bank i.e. effectively the sum of all loans outstanding as on the date of calculation. Net NPA% is calculated as the ‘Net NPA of the bank (as described earlier) divided by net advances’ i.e. sum of all loans outstanding less the provisioning for NPAs.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Note that only the absolute change in the Gross NPA comes close to showing the true movement of NPAs of the bank. And that too, with the lag of one quarter! That is, Gross NPA as of end-December minus the Gross NPA as of end-September will account for fresh defaults that have taken place in the July to September - and not the October to December - quarter! Net NPAs are distorted by provisioning, and both the ‘percentage ratios’ (Gross NPA% and Net NPA %) are distorted by the denominator. A bank can issue fresh imprudent loans and inflate the denominator, thus showing low NPA%. These fresh loans would become NPAs earliest only in the next quarter because of the 90-day rule.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>It’s not over yet. There are write-offs too!</b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Even difference in Gross non performing assets doesn’t tell the full story of bank’s NPA movement. NPAs are further impacted by the assets “written off” during the period. And this figure may only be available from the Annual Report once a year. Written off assets are reversed completely from the asset book, reducing the Gross NPAs of the bank and the overall asset base itself.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Coming back to RBI circular mentioned earlier, all that the RBI said was that for loans with due dates between 1<sup>st</sup> November 2016 to 31<sup>st</sup> December 2016; banks have an extra 60 days – beyond the normal 90 - to recognize them as NPAs. They would become NPAs only if they remain unpaid for 150 days after the due date i.e. between 30<sup>th</sup> March 2017 to 31<sup>st</sup> May 2017 respectively, instead of 30<sup>th</sup> Jan 2017 to 31<sup>st</sup> March 2017. The asset classification and the amount of provisioning the banks have to do, would be guided accordingly. <o:p></o:p></div><br /><div class="MsoNormal">As far as the borrowers are concerned, there was no change in their obligations to the bank; their due dates remained the same. There was no “EMI holiday” nor any “extra 60 days” to repay their credit.<o:p></o:p></div><div class="MsoNormal"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-42230633725312223712017-01-29T19:15:00.000+05:302017-01-29T19:15:09.199+05:30Death by China?<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">“We will follow two simple rules – buy American, hire American”, said a defiant Donald Trump to a cheering public &amp; an uncomfortable Washington Establishment, as he was sworn in as the 54<sup>th</sup> President of the United States of America earlier this month. In his election victory, Trump smashed most expert forecasts, election pundits, opinion polls and the mainstream media narrative that had consistently projected his opponent as the favorite to win. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">For those surprised by Trump’s victory, go no further than videos such as this, which might have played a major role in influencing public opinion during the U.S. Presidential elections. Claiming to be one of the most watched documentaries on Netflix for 3 years, the film narrates the story of an <i>“increasingly destructive trade relationship”</i> with China, which has led to the closure of over 50,000 American factories since China entered the WTO in 2001. The film blames China for causing loss of millions of jobs and accumulation of over $ 3 Trillion of U.S. debt to the <i>“world’s largest totalitarian nation”</i>. You can watch the full video&nbsp;here:</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/mMlmjXtnIXI/0.jpg" frameborder="0" height="266" src="https://www.youtube.com/embed/mMlmjXtnIXI?feature=player_embedded" width="320"></iframe></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"></div><div class="MsoNormal" style="text-align: justify;">Loaded with terms such as <i>“illegally subsidized exports”</i> or <i>“stealing jobs”</i>, the import of the film is clear: Over the past decade and more, America has lost its ‘trade battle’ with China, and this loss is the result of an ‘unfair’ advantage the Chinese businesses get vis-à-vis their American counterparts. The film makes five basic allegations to corroborate its claims:</div><div class="MsoNormal" style="text-align: justify;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;">1. <u>Polluting for Profits</u>: Stringent environmental norms on U.S. manufacturing levy a heavy financial burden on U.S. businesses, but their Chinese competitors follow no such norms, giving them a cost advantage.&nbsp;</span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;">2. <u>Worker Abuse</u>: China exploits its workers, forcing them to work for long hours often in inhuman conditions. This raises productivity per worker.</span><br /><span style="text-indent: -0.25in;"><br /></span><span style="text-indent: -0.25in;">3. </span><u style="text-indent: -0.25in;">Currency manipulation</u><span style="text-indent: -0.25in;">: China pegs the value of the Yuan to the Dollar much below what it should be, which benefits its exporters.</span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;">4. <u>Counterfeiting &amp; Piracy</u>: The Chinese are cheating on Patents, Trademarks and other such intellectual property.</span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;"><br /></span></div><div class="MsoNormal" style="text-align: justify; text-indent: 0px;"><span style="text-indent: -0.25in;">5. <u>Illegal Export Subsidies</u>: The Chinese Government grants illegal export subsidies to its exporters</span></div><div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Due to all this, says the film, "<i>they are cheating monumentally”</i> by producing - sometimes even at 1/10<sup>th</sup> the price of what it costs to produce in the United States. This has led to the death of American manufacturing. Almost 90% of all products sold at Wal-Mart are made in China. From garments to chopsticks, Christmas decorations to computers, and from printers to shoes – often it is almost impossible to find anything in an American store that is NOT made in China.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Really?</b><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The “unfair” Chinese advantage is easy to "see" - and hence to blame, but things become complicated as the film moves on to discuss the role of American Multinational Corporations, who have themselves been at the forefront of outsourcing their manufacturing. From Apple to Caterpillar and IBM to GE and Cisco to Ford, every large American corporate worth its name has shifted it’s manufacturing to China to cut costs and improve profitability. Is it right for a Corporate Entity to cut domestic jobs to maximize profits? The film admits “profits Vs.jobs is at the root of America’s offshoring problem”. Sure corporate CEOs are focused on shareholder value, but isn’t this exactly the way it should be? <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">From time to time, I have seen the “blame China” narrative make its way into public sentiment. But most such narratives tell only one side of the story. Ask someone who bought his first big screen TV or furniture 50% cheaper, cheap imports have given their buyers a standard of living that was not possible earlier. When a foreign government pays you to buy toys or coffee making machines, is there really a cause to complain? As corporate America offshored jobs, profits got a boost, and despite the Wall Street engineered financial crisis of 2008, stock markets today are at an all time high, boosting the 401(k)s and mutual funds of ordinary Americans. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The documentary also erroneously links the $ 3 T U.S. government debt that the Chinese hold with cheap imports. Contrary to what is shown (and even otherwise believed); the large government debt actually represents a huge advantage the United States enjoys over other nations on account of the U.S. Dollar being the currency of international trade. Most exports worldwide are invoiced in U.S. Dollars, and the exporting country has no alternative but to park them in U.S. Government debt. The money thus represents a virtually free source of financing for the U.S. government. And as Jack Ma, founder of Alibaba <a href="http://www.cnbc.com/2017/01/18/chinese-billionaire-jack-ma-says-the-us-wasted-trillions-on-warfare-instead-of-investing-in-infrastructure.html" target="_blank">pointed out recently</a>,&nbsp;what the U.S. did with this money may tell the true story of why the jobs went where they went.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">What about human rights? The film also mentions several human rights violations by China, such as the repression of the Falun Gong or Tibet, or its role in human organ trade or nuclear proliferation and aggressive military build-up. These are non-economic arguments that should not be used to color our judgment over cheap imports.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It is also a contradiction to state that China’s lack of concern for the environment gives them an “unfair advantage”. Indeed, the documentary itself shows China paying the price for its monumental environmental neglect. It is well known that Chinese cities are now considered to be among the most polluted in the world.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Where are the solutions?</b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The ‘blame China’ rhetoric is a fallacy, and it best stands exposed when its time to offer solutions. While the documentary ends recommending “trade reform with China” and says that China should be held “accountable for human rights abuses”, it fails to come up with specifics. While pitching for ‘a strong manufacturing base for a prosperous future’, the film fails to tell you exactly how it can be achieved. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">And this is no surprise. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">For, China is just the symptom, the cause lies elsewhere. And this is pointed out in the film itself by Ralph Gomory, President Emeritus, Alfred P. Sloan foundation, when he says, “we are living beyond our means, we have artificially high standards of living”. Fix that, and everything will fall in place. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><br /><div class="MsoNormal" style="text-align: justify;">And that’s what President Donald Trump will need to do, to “Make America Great Again”.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-84097234822590277822016-05-15T12:16:00.000+05:302016-05-15T12:16:22.515+05:30Fifty things that can pep up your life<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;">Here is a list to pep up your life! It came as an anonymous forward on WhatsApp, but I felt like preserving it for posterity. Hence I am putting it up on the site. Each one of the points is a gem, hope you like it too. Do let me know which ones you liked the most.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">1.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Have a firm handshake</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">2.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Look people in the eye</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">3.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Sing in the shower</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">4.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Own a great stereo system</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">5.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">If in a fight, hit first and hit hard</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">6.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Keep secrets</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">7.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Never give up on anybody. </span><span style="text-align: left; text-indent: -0.25in;">&nbsp;</span><span style="text-align: left; text-indent: -0.25in;">Miracles happen everyday</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">8.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Always accept an outstretched hand</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">9.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be brave. Even if you're not, pretend to be. No one can tell the difference</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">10.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Whistle</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">11.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Avoid sarcastic remarks</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">12.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Choose your life's mate carefully. From this one decision will come 90 per cent of all your happiness or misery</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">13.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Make it a habit to do nice things for people who will never find out</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">14.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Lend only those books you never care to see again</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">15.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Never deprive someone of hope; it might be all that they have</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">16.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">When playing games with children, let them win</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">17.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Give people a second chance, always</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">18.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be romantic</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">19.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Become the most positive and enthusiastic person you know</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">20.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Loosen up. Relax. Except for rare life-and-death matters, nothing is as important as it first seems</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">21.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Don't allow the phone to interrupt important moments. It's there for your convenience, not the caller's</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">22.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be a good loser for your loved ones</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">23.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be a good winner of Hearts</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">24.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Think twice before burdening a friend with a secret</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">25.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">When someone hugs you, let them be the first to let go</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">26.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be modest. A lot was accomplished before you were born</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">27.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Keep it simple</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">28.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Beware of the person who has nothing to lose</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">29.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Don't burn bridges. You'll be surprised how many times you have to cross the same river</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">30.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Live your life so that your epitaph could read, “No Regrets”</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">31.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Be bold and courageous. When you look back on life, you'll regret the things you didn't do more than the ones you did</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">32.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Never waste an opportunity to tell someone you love them</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">33.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Remember no one makes it alone. Have a grateful heart and be quick to acknowledge those who helped you</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">34.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Take charge of your attitude. Don't let someone else choose it for you</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">35.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Visit friends and relatives when they are in hospital; you need only stay a few minutes</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">36.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Begin each day with some of your favorite music</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">37.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Once in a while, take the scenic route</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">38.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Forgive quickly. Life is short</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">39.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Answer the phone with enthusiasm and energy in your voice</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">40.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Keep a note pad and pencil on your bed-side table. Million-dollar ideas sometimes strike at 3 A.M</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">41.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Show respect for everyone who works for a living, regardless of how trivial their job</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">42.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Send your loved ones flowers. Think of a reason later</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">43.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Make someone's day by encouraging them</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">44.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Become someone's hero</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">45.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Marry only for love</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">46.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Count your blessings</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">47.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Compliment the meal when you're a guest in someone's home</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">48.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Waive at the children on a school bus</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">49.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Remember that 80 per cent of the success in any job is based on your ability to deal with people</span></div><div class="MsoNormal" style="text-align: justify;"><span style="text-align: left; text-indent: -0.25in;">50.</span><span style="font-size: 7pt; font-stretch: normal; text-align: left; text-indent: -0.25in;">&nbsp;&nbsp; </span><span style="text-align: left; text-indent: -0.25in;">Don't expect life to be fair</span></div><div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><o:p></o:p></div><br /><div class="MsoNormal"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-55674566467647749192015-12-06T10:57:00.001+05:302015-12-06T10:57:17.750+05:30The real truth behind long term investments<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;"><i>“Our favorite holding period is forever” – Warren Buffet<o:p></o:p></i></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Financial advisors, fund managers, research analysts and other elites of the investing community always claim that ‘equities provide the highest return among all asset classes in the long run’. The pink press regularly dishes out data comparing long term returns from various assets classes, such as equities, gold, real estate, bank deposits and so on. Usually, stock market indices such as the BSE Sensex or NSE Nifty are used as proxies for returns from equities. Stories of successful “long term” investors such as Warren Buffet, serve as useful mascot to support these claims. The consensus currently, in the personal finance community, is that to create serious wealth, you need to invest in equities, and stay invested for the long term. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><b><br /></b><b>Rakesh Jhunjhunwala</b></div><div class="MsoNormal" style="text-align: justify;">Rakesh Jhunjhunwala is among India’s best known investors&nbsp;and <a href="https://en.wikipedia.org/wiki/Rakesh_Jhunjhunwala" target="_blank">needs no introduction</a>&nbsp;to the investor community. Recently, I came across a study published by financial newspaper 'Mint'. The study analyzes 91 stock market investments of Mr. Jhunjhunwala in 84 companies (some companies were bought &amp; sold more than once, hence the difference) over the last 10 years where he has held more than 1% stake at any point of time. Under extant regulations, investments above 1% of a company’s share capital are required to be disclosed to the stock exchanges, hence this is publicly available data.&nbsp; Before we proceed, I urge you to read the full Mint article <a href="http://www.livemint.com/Money/r06HO0RUtK82ReZnxPzKwL/The-secret-of-Rakesh-Jhunjhunwalas-success.html" target="_blank">here</a>.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The study finds that Mr. Jhunjhunwala’s “…average returns have been highest from stocks he held the longest”. The message for the lay investor, is that <i>the longer you remain invested in a stock, higher your return. </i>This argument is supported by a quote in the article, attributed to a professor from IIM, Kozhikode, “In the long run, stock markets in general have been seen to move in an upward direction. <b>Therefore, the longer you hold on, the probability of superior returns is quite high</b>”&nbsp;(emphasis mine).</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">However, this<i> </i>conclusion<i> </i>is not even half the story.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"></div><o:p></o:p><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-9hXqIOCu-dI/VmGPXrIg9oI/AAAAAAAADi8/CR1xxzTgoyw/s1600/20150424_164129.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="http://3.bp.blogspot.com/-9hXqIOCu-dI/VmGPXrIg9oI/AAAAAAAADi8/CR1xxzTgoyw/s400/20150424_164129.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Behind every successful 'long term' investment are nine other not so long term investments</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In fact, the Mint study finds that average holding period of Mr. Jhunjhunwala for these investments is just 3.44 years. In 26 out of the 91 investments (i.e. 29% of the time), Mr. Jhunjhunwala has exited the investment in less than one year. The article itself quotes a study of Warren Buffet’s investments, which found that “he held most of his stocks for approximately a year. He held his stake in only a fifth of his companies for at least two years.” Clearly, Buffet’s favorite holding period may be forever, but only 20% of his investments enter even the third year. This is quite at variance with the conventional image of these “long term” investors, who are thought to hold their investments for decades, not just years.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Even the market indices such as Sensex or Nifty that are used as proxy for the equity asset class are not static. Their composition changes frequently as some stocks are removed and others added. An article in The Hindu points out (click <a href="http://www.thehindubusinessline.com/portfolio/how-sensex-has-changed-over-the-last-ten-years/article2783309.ece" target="_blank">here</a>) that&nbsp;between the period 2002 to 2012, the Sensex delivered a compounded annual return of 17%. Very attractive by all means, but during this period the index was reshuffled 18 times, with 26 of the 30 stocks replaced! I am sure if returns were calculated using the same stocks which existed at the start of the period, they would certainly not turn out to be as attractive.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /><b>Conclusion</b></div><div class="MsoNormal" style="text-align: justify;">The Mint article makes a reference to some of Mr. Jhunjhunwala’s best known investments (such as Titan, Lupin etc.) which he has held for decades. However, to state that these investments have provided best returns <i>because</i>they have been held the longest is to put the cart before the horse. The truth in fact, is the other way round.<br /><br />These investments have been held the longest <i>because </i>they have provided the best returns.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The strategy of ruthlessly exiting mediocre investments quickly seems as much an integral part of Mr. Jhunjhunwala’s (or Warren Buffet’s) success as holding on to best for 10 years or longer. And the ability to differentiate between what to exit and what to hold on is what makes these investors stand apart from the rest. Not an easy act to follow.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-3707730117522318522015-11-25T21:19:00.000+05:302015-11-25T21:19:08.020+05:30The Intolerance debate<div dir="ltr" style="text-align: left;" trbidi="on"><div align="JUSTIFY" style="margin-bottom: 0cm;"><i>Intolerance (n.) – unwillingness to accept views, beliefs or behavior that differ from one’s own</i></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">Over the past few weeks, a debate about rising “intolerance” has been raging in India. Several writers have returned awards citing “<a href="https://en.wikipedia.org/wiki/List_of_writers_who_have_returned_the_Sahitya_Akademi_Award" target="_blank">rising intolerance in India</a>”. Talking to India Today TV, film actor Shah Rukh Khan has reportedly said, “There is intolerance, there is extreme intolerance… there is, I think…, there is <a href="http://indianexpress.com/article/india/politics/theres-extreme-intolerance-in-india-says-shah-rukh-khan-on-50th-birthday/" target="_blank">growing intolerance</a>”. More recently, actor Aamir Khan said that alarmed by recent events, his wife Kiran Rao has suggested that <a href="http://indiatoday.intoday.in/story/aamir-khan-joins-intolerance-debate-says-wife-kiran-wants-to-leave-indian/1/529976.html" target="_blank">they should leave India</a>.&nbsp;</div><div align="JUSTIFY" style="margin-bottom: 0cm;"><span style="text-align: left;"><br /></span></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><span style="text-align: left;">I find this whole issue utterly ridiculous.</span></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">Intolerance is a subjective term; it means different things to different people. Also, opinions always differ from person to person, and there is nothing wrong in different people having divergent opinions. Beyond a point therefore, the current debate on whether there is growing intolerance in the country or not is futile, it is never ending. Nobody claims that each and every one of 121 crore Indians are tolerant. Nor are all of them intolerant. </div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">The slant in the current debate is that intolerance has increased after the new government came to power in May 2014. For example, Aamir Khan has reportedly said that <i>“…the sense of insecurity and fear has been growing in the past six or eight months”</i>. Coming from Aamir Khan, the statement is all the more surprising, since his film “PK” was considered to be hurtful to the religious sentiment of Hindus and was demanded to be banned by certain right wing organizations. However, the film was not only allowed to be released, but became one of the highest grossing Indian films of all times.&nbsp;</div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">The so-called “intolerance”, was nowhere on display, neither on the part of the government, nor on the part of majority of the viewers.</div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b><br /></b></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-lh3ShG0Ru3Y/VlXURhiqIOI/AAAAAAAADiA/cVY8DFbPEWA/s1600/20141122_100929.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="http://3.bp.blogspot.com/-lh3ShG0Ru3Y/VlXURhiqIOI/AAAAAAAADiA/cVY8DFbPEWA/s400/20141122_100929.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">No intolerance on display - PK was a big hit</td></tr></tbody></table><div align="JUSTIFY" style="margin-bottom: 0cm;"><b><br /></b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b>How we decide</b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">On any such issue, a rational person should base his opinions &amp; judgments on two primary sources: </div><ol><li><div align="JUSTIFY" style="margin-bottom: 0cm;">Official data</div></li><li><div align="JUSTIFY" style="margin-bottom: 0cm;">Personal experience. </div></li></ol><div align="JUSTIFY" style="margin-bottom: 0cm;">Sources such as newspapers, television are secondary sources and should never be made the primary basis of our opinion and judgment. They can best be used for confirmatory signals when they support what data and personal experience indicates. Secondary sources should be taken with a pinch of salt when they contradict data and personal experience. Further, even while using these secondary sources, care should be taken to differentiate facts from opinions. </div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">Let us say, the TV anchor reports something like this:</div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">“<i>A person was killed because he was selling beef. There is growing intolerance in the country.”</i></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">In this, </div><ol><li><div align="JUSTIFY" style="margin-bottom: 0cm;"><i>A person was killed</i> is a fact. </div></li><li><div align="JUSTIFY" style="margin-bottom: 0cm;"><i>Because he was selling beef</i> is the suspected motive. It may be proved or disproved after a full investigation is over. </div></li><li><div align="JUSTIFY" style="margin-bottom: 0cm;"><i>There is growing intolerance in the country</i> is a generalization which will need supporting data with a much larger sample size. </div></li></ol><div align="JUSTIFY" style="margin-bottom: 0cm;">When we listen to such news, and form our opinions and judgments based on them, we must be conscious of what we are relying on. When I listen to the above news, I would give 100% weightage to point no. 1 above, 50% weightage to point no. 2 and zero weightage to point no. 3. </div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b><br /></b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b>Where is the data?</b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">The Home Ministry website has lot of statistics on the country’s crime. None of those who allege intolerance have provided any data to support their thesis. Note that even when data is present, it needs to be <i>analyzed</i>carefully, as raw numbers may prove existence of fact, but not causation. I have often seen that from the same set of numbers, different people draw different inferences. For example, economists differ on whether the economy is doing well, or poorly, though both sides refer to the same sets of data. </div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">In the present debate, there is no data or survey which indicate how many attacks have been caused by this alleged “intolerance” and <i>whether there is any substantial increase in them after the change of government at the Centre</i>. Besides, let us also not forget that under the constitution, law and order is a state subject. We cannot blame Modi for riots in Gujarat while using a different yardstick for law and order problems in Assam, U.P. or West Bengal or elsewhere. The intolerance argument fails miserably against the “data” test.</div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b><br /></b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><b>Personal experience</b></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div><div align="JUSTIFY" style="margin-bottom: 0cm;">My personal experience and observation does not corroborate the intolerance allegation. To the extent I see around myself at home, in office or in my neighborhood, behavior of the people, inter-personal and social relationships and attitudes towards others including towards people belonging to other religions are the same today as they were before May 2014.&nbsp;<span style="text-align: left;">If your <b>experience</b></span><span style="text-align: left;">&nbsp;is any different, you are entitled to hold a different opinion. &nbsp;But to me, the intolerance argument makes no sense.&nbsp;</span></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><span style="text-align: left;"><br /></span></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><span style="text-align: left;">The only intolerance I see is an intolerance <b>towards</b> Modi.</span></div><div align="JUSTIFY" style="margin-bottom: 0cm;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-14098391764777433022015-11-16T18:19:00.000+05:302015-11-16T18:19:22.098+05:30Reforming the education system<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;"><i>The only thing that interferes with my learning is my education – Albert Einstein</i><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Make no mistake. India is heading into an education and employment crisis. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">At more than 127 crore people, India is home to world’s 2<sup>nd</sup> largest population. Nearly 1/3<sup>rd</sup> of this is in the age group of 0-14 years, who are / will be entering primary &amp; secondary schooling in the coming years. An estimated 40 thousand colleges in the country enroll more than 2 crore students under various courses every year, a majority of them in the 3 year B.A. / B.Com. / B.Sc. courses. There is no way any government scheme or programme can create gainful employment for these aspirants in such large numbers. The task before the country’s education system is to prepare this generation for the humongous challenges that lie ahead.<br /><br /></div><div class="MsoNormal" style="text-align: justify;">India’s current education system traces its origins to Thomas Macaulay’s English Education Act of 1835. The Act introduced English as the principal medium of instruction, and sought to create a neo-intellectual class who held English in high esteem and contempt towards the traditional. “<i>We must at present do our best to form a class who may be interpreters between us and the millions whom we govern; a class of persons, Indian in blood and colour, but English in taste, in opinions, in morals, and in intellect”</i>,<i> </i>Macaulay wrote. The Act created a system which produced a useful workforce of English speaking clerks and officers, loyal and ready to serve the Raj.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">To this day, the basic character of the system Macaulay framed remains the same. Our education holds conservatism and obedience as big virtues, discourages daring &amp; risk taking, and challenge to established conventions are held in contempt. Deference to authority becomes a ‘good habit’, discipline is demanded and rewarded. Creating such a mindset among the people suited the Imperial administration subjugate a large population, who could otherwise rebel and throw the outsiders out. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">But is that what we need to teach our children today? We need a system which abolishes this slave mentality, and creates employers, not employees.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">At a fundamental level, the purpose of education is to cause mental, physical and spiritual development of an individual. These qualities form in the early years of a child’s life. To start with therefore, we need a much larger focus on soft skills in primary education than is given at present. Risk taking needs to be encouraged. Failure should be taught as a stepping stone to success, rather than something to be ashamed of. Qualities such as hard work, perseverance, team spirit, motivation and determination need to be tested and assessed for each child. We need to teach our children that long term gain often involves short term pain. A mindset which embraces change needs to be consciously cultivated. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">I don’t even ask whether we are doing it today, I first want to know whether there is a way to do this today, formally and methodically. Most probably – the answer is ‘no’. So this is where we need to start. We need to find ways <i>how</i> these qualities can be inculcated in our children. What are the teaching methodologies we should use, and how it can be done effectively &amp; consistently. I have no straightforward answers for these questions.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">On a more practical level, our education needs to prepare our children to make a gainful living. They need to create ‘value’, in the economic sense of the term. Where are we on this paradigm?<br /><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-9oN42FIUTao/VkhcsS0n9-I/AAAAAAAADhU/nbDcdTOkTGk/s1600/education.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="320" src="http://4.bp.blogspot.com/-9oN42FIUTao/VkhcsS0n9-I/AAAAAAAADhU/nbDcdTOkTGk/s320/education.jpg" width="180" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Rajabhai Tower, University of Mumbai</td></tr></tbody></table><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Like in many other fields, the internet has completely changed the playground for education. Information on nearly everything is available at our fingertips. Accessing knowledge has become easy. But <i>using</i>&nbsp;this knowledge in ways that benefits humanity, creates value, is what will differentiate tomorrow’s winners from the rest. The graduates our universities churn out year after year are little capable of doing this. Industry complains that they are unemployable. The lucky few who find jobs get trained by their employers after joining. They find little use in their day to day work for what they learnt in college. <b>After spending 15 years of life and lacs of rupees,&nbsp;</b><b>for a majority of our graduates&nbsp;</b><b>the return on investment in education is zero.</b></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">To address this problem, the present government has focused heavily on “<a href="http://www.skilldevelopment.gov.in/" target="_blank">skill development</a>". The initiatives under various skill development programmes recognize deficiencies of the current system to impart job oriented skills to students and make them ‘employment ready’ with the industry. While these initiatives are welcome, it is still too little when confronted with the enormity of the task of making our children ‘life ready’. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In the last 15 – 20 years, new technologies and business models have completely altered the global business landscape.&nbsp; At the risk of using a much clichéd term, change has become the only constant, and at a pace that is simply mind boggling. We have no clue how the business world &amp; industry will look ten years from now. The ‘skills’ we train our children today may become redundant in a few years from now, while those which dominate tomorrow have not even been developed today. This is what the focus on skill development leaves out. It is not to say that skill development is not useful, but it is just not sufficient. Skills come much later in life; it is training the mind where we are failing miserably.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A paradigm shift is needed in the way we look at education itself. Periodic revision of curricula does little to address these concerns. <a href="https://en.wikipedia.org/wiki/T.V._Mohandas_Pai" target="_blank">TV Mohandas Pai</a>&nbsp;points out that education has now moved to a <a href="http://www.thehindubusinessline.com/news/education/mohandas-pai-calls-for-full-autonomy-to-top-200-varsities/article7846963.ece" target="_blank">technology platform</a>. A student in India can get a U.S. degree sitting at home, while our Universities are not allowed to offer courses outside the state. He foresees <i>“many students will soon move away from the formal system of education and would get a degree through MOOCs (massive open online courses) and online courses, and these degrees will be recognized by the world”</i>. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">There is little recognition of this disruption in government circles. The system seems to be unable to move beyond minor tinkering of the mandated curricula, exam patterns and Nehruvian regulation. For example, a recent committee appointed by the HRD Ministry was tasked ‘to review’ the <a href="http://mhrd.gov.in/sites/upload_files/mhrd/files/upload_document/Report-of-Committee.pdf" target="_blank">JEE system</a>&nbsp;for admission to IITs. The committee viewed the private ‘coaching industry’ as a menace rather than a partner in imparting education to willing students. But before we reform the 'entrance tests', the important question to ask is - <b>do we even need entrance tests and selection processes at all</b>, when we can digitize our books and lectures, opening them up to every single aspirant? Professors can concentrate on solving queries and answering questions online, while holding webinars which can be attended by thousands of students from their homes. My guess is that even if 80% of a course can be ‘delivered’ in this way, it can bring manifold economic benefits, because access has been given to every single aspirant at no extra cost &amp; effort, and not just to select few who pass the entrance tests. In fact, <b>a scenario where the universities concentrate only on conducting certifications while giving students the freedom to learn from wherever they want, will dramatically improve the effectiveness of education</b>. Unfortunately, such changes are not even on the agenda.<o:p></o:p></div><br /><div class="MsoNormal" style="text-align: justify;">If we don’t fix our education urgently, we are heading for a job crisis of mammoth proportions.<o:p></o:p><br /><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-90865353612480630402015-04-26T19:21:00.000+05:302015-04-26T19:21:46.270+05:30Four ways of bringing back Black Money<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;">The subject of black money stashed abroad has attracted considerable attention in recent times. It was an important issue in last year’s general elections, and UPA government’s inaction was seen as one of the reasons behind its electoral defeat. Recently, the NDA government has introduced the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill 2015, popularly known as the Black Money Bill, in the Parliament. In a discussion organized by the <a href="http://foundation.moneylife.in/" target="_blank">Moneylife Foundation</a>, Dr. Subramanian Swamy (sorry, he doesn’t need an introduction!) <a href="http://www.dnaindia.com/india/report-bjp-leader-subramanian-swamy-says-black-money-bill-would-be-ineffective-2080495" target="_blank">shared his views</a>&nbsp;on the bill, and black money in general. Here is a quick recap of the event. (I have given a more detailed perspective on the black money issue in a previous post, click <a href="http://chandragupta-acharya.blogspot.in/2014/12/black-money-india-swiss-banks.html" target="_blank">here</a>)<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">By some estimates, an amount of approximately Rs.120 lac crores is lying outside the country. Dr. Swamy started by saying the bill falls short of the objectives of bringing back this amout. The bill depends on the assumption that the money is detected or declared by the assessee, but does not have steps to actually bring it back. It is essentially a "tax bill", clarifying how to tax what is already known. It can also be misused, as it gives draconian powers to tax officials.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Dr. Swamy said there are two aspects to this whole issue – first, bringing back the money stashed abroad and second, stopping creation of new black money. On the first, he said there are four ways of dealing with the problem. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-9RySmQ0RY58/VTtMoJ9gXqI/AAAAAAAACiY/g1s6j8KTJuw/s1600/20150424_185907.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-9RySmQ0RY58/VTtMoJ9gXqI/AAAAAAAACiY/g1s6j8KTJuw/s1600/20150424_185907.jpg" height="225" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Black Money Bill will not bring back the money, said Dr. Swamy at a Moneylife event</td></tr></tbody></table><br /><br /></div><div class="MsoNormal" style="text-align: justify;">One, exchange of information under Double Tax Avoidance Treaties (DTAA). India has DTAA with several countries. An Indian assessee having income in a foreign country (say, Germany) and intent on avoiding tax tells India he is paying tax in Germany, and tells the Germans he is paying tax in India. Actually, he pays at neither place. Such cases can be detected with exchange of information between the two countries. Most media discussion on the black money subject is centered on this aspect. The UPA pursued only this angle during their rule. However, this is a very small aspect of the overall quantum of black money. &nbsp;<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A second alternative is to obtain details of account holders who are holding accounts abroad secretly and illegally, secretly and illegally! In <a href="http://en.wikipedia.org/wiki/2008_Liechtenstein_tax_affair" target="_blank">one instance</a>, Germany reportedly bribed bank officials and obtained information about its nationals holding accounts in Liechtenstein, a tax haven in the heart of Europe. France did the same with HSBC. <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A third alternative is to extract information by force, used by the U.S. (who else?) against banks such as <a href="http://www.wsj.com/articles/two-ex-credit-suisse-bankers-avoid-jail-time-in-tax-evasion-case-1427474709" target="_blank">Credit Suisse</a>&nbsp;and <a href="http://en.wikipedia.org/wiki/UBS_tax_evasion_controversy" target="_blank">UBS</a>. The U.S. government charged local branches of these banks with crime, arrested its officials and forced the banks to share information.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Finally, Fali Nariman, a noted Indian constitutional expert and lawyer has suggested that an ordinance can be passed nationalizing all foreign assets lying abroad, and asking all other countries to repatriate the money to India. There is a 2005 United Nations Resolution backing this, and the foreign governments will be forced to comply, irrespective of their bank secrecy laws. This has been done very effectively by Egypt to recover illegal assets of its former President Hosni Mubarak, by Libya against Qaddafi and by Philippines against Ferdinand Marcos.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Dr. Swamy said this last method is the best and the cleanest method to recover the money lying abroad. Incidentally, this is the same one I have mentioned in my previous blog post on this subject (link given above) as “<i>the one I have found the most actionable</i>” quoting an article by India’s National Security Advisor Ajit Doval.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Besides the issue of bringing back money stashed abroad, a second aspect is how to stop its generation in the first place. In this, he touched upon a number of topics such as the need to abolish P-notes due to its role in facilitating money laundering, abolishing income tax, streamlining excise, bringing in e-governance and quickly &amp; efficiently delivering justice to a few ‘big fish’ caught in the act. He recalled how <a href="http://en.wikipedia.org/wiki/Bernard_Madoff" target="_blank">Bernie Madoff</a>&nbsp;was quickly sentenced to 150 years in prison within just six months of his fraud coming to light. On the other hand, <a href="http://en.wikipedia.org/wiki/Byrraju_Ramalinga_Raju" target="_blank">Ramalinga Raju's</a>&nbsp;case, which came to light at around the same time, is still dragging in court. Dr. Swamy also stressed the need for deregulation and simplification. For example, he pointed out that more than 2000 products have excise on them, but 90% of excise revenue comes from just 22 products. He emphasized that honesty needs to be encouraged in society.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">There was a very interesting question &amp; answer session at the end, where he took questions from audience and touched upon several other aspects of corruption and black money. On the whole, a very engaging session!</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-41452513189007573642014-12-31T10:16:00.000+05:302015-01-23T10:14:20.802+05:30Do airlines "fleece" passengers?<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;">For over two decades, the Ministry of Civil Aviation has presided over the demise of many an airlines in the country. As one more airline prepares to breath its last, a series of measures are being “considered” in an effort to “do something”. Among the proposals being considered is a ridiculous proposal to <a href="http://www.asianage.com/business/dgca-plans-control-ticket-pricing-545" target="_blank">cap airfares</a>.&nbsp;<i>“…to prevent airlines from both over-charging passengers in spot fares while at the same time ensuring that airlines do not offer very cheap fares below the cost of operation….the ministry sources had recently indicated that there could be a cap of about Rs. 15,000 on maximum fare on any sector. The ministry sources are exploring the possibility of linking fares to the distance per km. Civil aviation minister Ashok Gajapathi Raju is currently examining the proposal which could be cleared by the ministry very soon…”.&nbsp;</i><br /><br />In fact, every time airfares go up, the myth of airlines ‘fleecing’ air passengers <a href="http://www.moneylife.in/article/airfare-rise-hc-asks-govt-to-submit-copies-of-licences-granted-to-private-airlines/39872.html" target="_blank">rears its head</a>. What is shocking is that even the DGCA <a href="http://timesofindia.indiatimes.com/india/Dont-fleece-flyers-grounded-by-SpiceJets-woes-DGCA/articleshow/45597698.cms" target="_blank">subscribes to this view</a>. Its high time this myth about fleecing air passengers is busted.<br /><div style="margin: 0in 0in 0.0001pt;"><o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-jbErxqkkLis/VMHRM6FN2MI/AAAAAAAACdg/kCFhnHmSTRQ/s1600/20150105_111750.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-jbErxqkkLis/VMHRM6FN2MI/AAAAAAAACdg/kCFhnHmSTRQ/s1600/20150105_111750.jpg" height="225" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Can the Ministry of Civil Aviation explain why - since 1991 – aviation has done so badly while every other industry in the country has prospered ?</td></tr></tbody></table><br /></div><div style="margin: 0in 0in 0.0001pt;"><b>Aviation is a difficult business<o:p></o:p></b></div><div style="margin: 0in 0in 0.0001pt;">An aircraft is a complex machine. An average commercial aircraft takes 6 months to build and costs a million dollars. A popular airplane such as a Boeing 737 is made up of 6,00,000 parts while the bigger ones like Boeing 777 may have them in millions. Malfunctioning of a single part can prove fatal, as the plane flies in inhospitable conditions 30,000 feet above the earth’s surface. &nbsp;Modern day planes carry ‘autopilot’ modes that use computer software to control &amp; guide the aircraft, eliminating human errors. Aviation consumes billions of dollars in R &amp; D expenditure, and has over the years made our flying experience safer, faster and better.<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;"><a href="http://www.indiaspend.com/cover-story/deadly-year-decade-for-flying-but-safer-than-before-54820" target="_blank">Notwithstanding some recent incidents</a>, air travel is remarkably safe and punctual. Most flights take off and land on time, and accident rates are near zero. <a href="http://www.boeing.com/boeing/commercial/safety/index.page" target="_blank">Boeing reports</a>&nbsp;that in more than half a century of commercial flights (1959-2013), there have been less than two thousand accidents across the globe, of which only one third had fatalities. Compare this with accident statistics on road, where more than 1.1 million people have died in <a href="http://data.gov.in/keywords/indian-road-accident-data" target="_blank">road accidents in India</a>&nbsp;in just the last ten years (2003-2012) alone.<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;">For all this, and the sheer speed of travel, the passengers have to pay.<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;"><b>The economics of aviation business</b><o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;">Running an airline is highly capital intensive. Aircrafts are expensive, specialized technical staff such as engineers and pilots don’t come cheap either. An inventory of spare parts needs to be kept at all times. Maintenance facilities are few and expensive. India’s aircrafts reportedly fly to places like Singapore and Abu Dhabi for maintenance. More than 50% of the operating costs of an airline are fuel costs alone. All these costs are recovered mainly from sale of tickets and booking of cargo. But in India the business is taxed heavily under the faulty notions of “taxing the rich”. A large chunk of the ticket price you pay never reaches the company and is pre-empted by the government.<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;">Once a flight has been “scheduled”, all the costs are almost fixed. Whether the flight takes off with ten passengers or a hundred, it costs the same to the airline. In other words, the <i>incremental cost of flying an ‘additional’ passenger is almost zero</i>. This lends the airline industry neatly to a dynamic pricing model, where empty seats in a flight can be sold off cheap – every additional rupee directly adds to the recovery of the fixed costs. If and only after all the fixed costs are recovered can the airline turn in a profit. For any business to be sustainable, it needs to make a profit.<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;"><b>The myth of 'fleecing' air travelers</b><o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;">In the short run, supply of seats is largely fixed, as flight routes and schedules are announced in advance. It is therefore the demand for seats which drives airfares. When the demand is high, the airfares rise. Higher airfares help airlines earn revenues which compensate for low fares when the demand is low. The notion that airlines “fleece” travelers with high fares is therefore flawed and misleading. The 'fleecing' allegation is impossible to accept when most airlines are making losses. A 'fleecing' business would typically be a monopoly and make super-normal profits. If an airline demands fares which are exorbitant, travelers have an option of using some other airline, other modes of transport, or even not travelling at all. It is the traveler who decides whether she values the travel as much as the price of the ticket, and takes a decision. Also, high fares apply to a small number of seats that are sold closer to the date of flight, passengers who plan their travels well in advance can usually buy 'reasonably' priced tickets even in peak season. However, the media sensationalizes a few isolated instances of high spot fares and misleads the public.&nbsp;<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;">If there is any fleecing that occurs, it is due to the high taxes that are imposed on every aspect of the business. A huge chunk of the ticket price that the buyer pays doesn’t go to the airline. If high airfares in peak season are banned, it will impact the ability of the airlines to offer low airfares in slack season, and no one will be any wiser.&nbsp;<o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;"><b>On the death bed - again</b><o:p></o:p></div><div style="margin: 0in 0in 0.0001pt;">The aviation sector in India was first opened up in the early 1990s, but most airlines which came up at that time have failed to survive. A second lot that came up in the early 2000s with the entry of low-cost pioneer Air Deccan has done no better. &nbsp;The main contributor to poor mortality of India’s aviation sector is the regulator itself. The sector has been “…<a href="http://articles.economictimes.indiatimes.com/2014-07-08/news/51191434_1_aviation-sector-civil-aviation-new-airports" target="_blank">choking on high taxes</a>, poor regulation and bad airports…”, to quote Capt. Gopinath. The DGCA seems to have taken upon itself the mandate to regulate airfares. The Narendra Modi government has come to power on a platform of <i>'good governance'</i>. The PM has often espoused the cause of <i>'minimum government, maximum governance'</i> and claims to have a business friendly image. That such a government can even think of regulating airfares sends a shiver down my spine.&nbsp;</div><div style="margin: 0in 0in 0.0001pt;"><br /></div><div style="margin: 0in 0in 0.0001pt;">(See also "<a href="http://chandragupta-acharya.blogspot.in/2010/11/our-airfares-are-too-low.html" target="_blank">Our airfares are too low</a>" on what are "high" and "low airfares)</div><div style="margin: 0in 0in 0.0001pt;"><br /></div></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-838814560088654972014-12-21T11:06:00.000+05:302014-12-21T11:06:08.235+05:30The misleading debate on bringing back Black Money<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;">Imagine this.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><i>Journalists &amp; cameramen have assembled in large numbers at the Delhi’s Indira Gandhi International Airport, eagerly awaiting the arrival of an incoming Air India flight. The flight arrives, and a triumphant Arun Jaitley, India’s Finance Minister steps out of the aircraft, flanked by top Finance Ministry officials. He is carrying two large suitcases in his hands. For a moment, he puts the suitcases down and waves to the waiting media. Everyone knows what’s in those bags. The reporters just cannot wait to ask him some questions. The moment has arrived. Yoga guru Baba Ramdev is among the first to issue a congratulatory tweet to the NDA government. Prime Minister Narendra Modi proudly proclaims that his government has completed an electoral promise made to the nation. The black money stashed abroad by unscrupulous Indians in Swiss banks has finally been brought back!</i><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">If this is your visualization of the moment when India is going to get back its promised “black money” from Swiss banks, this write-up is going to disappoint you. But the media coverage of the black money issue has been so wanting in depth, and so mired in meaningless sensationalism, that the <i>aam aadmi</i> may be forgiven for thinking something similar is going to happen one day. The manna from Switzerland is bound to arrive. After all, wasn’t it part of the “<i>Achche Din” package?</i> <o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br />In this article, I put in perspective a few thoughts on this much debated topic which seem sorely missing from the mainstream discourse.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><b>The color of “Black Money”<o:p></o:p></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">I have found most discussion on the black money issue, such as&nbsp;<a href="http://articles.economictimes.indiatimes.com/2014-11-27/news/56515349_1_finance-minister-arun-jaitley-black-money-tax-payers" target="_blank">this</a>&nbsp;or&nbsp;<a href="http://www.thehindu.com/news/national/govt-to-relook-at-tax-treaties-to-unearth-black-money-arun-jaitley/article6625082.ece" target="_blank">this</a>&nbsp;or&nbsp;<a href="http://firstbiz.firstpost.com/economy/hsbc-black-money-list-tax-officials-probing-79-acs-with-rs-4479-cr-112927.html" target="_blank">this</a>&nbsp;or&nbsp;<a href="http://indianexpress.com/article/india/india-others/rs-4479-cr-in-indians-hsbc-list-accounts-sit-on-black-money/" target="_blank">this</a>&nbsp;center around tax evasion. Businessmen make profits on which they do not pay tax, the money is secretly moved to some bank in Switzerland. This money needs to be brought back as the country is losing out on tax revenue. This is the standard narrative of black money that is dished out to the <i>aam aadmi</i>.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;">However, this is far from the truth. Tax evasion is only a part of the problem.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><b><br /></b></div><div class="MsoNormal" style="text-align: justify;"><b>Proceeds of crime<o:p></o:p></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A large part of the money stashed abroad illegally is, what is termed in banking parlance as “proceeds of crime”. It owes its origin to criminal activities like corruption, misappropriation of government funds, fraud, cheating, or activities of underworld gangs, drug mafias and terrorists. The entire wealth accumulated though criminal activities is illegal and liable for confiscation. The account owners are liable for criminal prosecution. Here, the question of tax assessment, payment of penalties or even amnesty (as suggested by some), does not crop up at all. Simply speaking, if I steal Rs.100 from you and hide it under the carpet, the problem is not that I have not paid Rs.30 of tax, the problem is that I have stolen Rs.100. No government in its right senses can regularize this wealth on payment of tax.<br /><br />Most discourse on black money conveniently skips this angle.<br /><br /></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-kYda4mPExBg/VJOrkGEkYhI/AAAAAAAACZ8/dEc1tKBb480/s1600/2014-12-19%2B08.33.10.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-kYda4mPExBg/VJOrkGEkYhI/AAAAAAAACZ8/dEc1tKBb480/s1600/2014-12-19%2B08.33.10.jpg" height="282" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Under-invoicing of exports and over-invoicing of imports is a standard mode of laundering money abroad</td></tr></tbody></table><b><br /></b></div><div class="MsoNormal" style="text-align: justify;"><b>Where is the money?<o:p></o:p></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A common misconception that people seem to have is that the money is lying in some (Swiss, mostly) bank account. But is it there really? Do you really believe that someone stashing millions of dollars of stolen money would keep it in a bank account for years together for everyone to see?&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Obviously, the money has already been used up – to buy villas and yachts and Ferraris, to invest in Hedge Funds or Private Equity, to buy Soccer Clubs or Formula One teams, to purchase hotels, farmland or commercial property, to invest in shares or pay back loans! Even the returns generated from these would have been further used in payment of dividend, for business or further investments. It is nearly impossible to “bring back” the money the way most people seem to think about it.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;">Most of the government’s efforts on this issue has centered on enabling sharing of information with foreign governments or banks involved. Even if that is accomplished, all that a bank can share is a statement of account, many of them in <i>benaami</i> names or shell companies. The statement would contain inflows &amp; outflows, but actually getting the money back is a different ball game altogether. In this era of electronic transfer, when money can be moved from one corner of the world to another in a matter of seconds, we can never get anything in a foreign bank to confiscate. No government, following its “due procedure” can ever move faster than the account holder himself and ‘catch’ the money in a foreign bank before it moves out.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Black money once “created”, is simply impossible to “bring back”, at least in the manner in which it is being made out to be. Its better the people face this reality and temper their expectations, no matter how noble the intentions of the authorities may be.<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><b><br /></b></div><div class="MsoNormal" style="text-align: justify;"><b>How big is the problem</b></div><div class="MsoNormal" style="text-align: justify;"><b><br /></b></div><div class="MsoNormal" style="text-align: justify;">There is no doubt that the extent of the problem is humungous and needs to be tackled on a war footing. For example, <a href="http://www.gfintegrity.org/press-release/new-study-crime-corruption-tax-evasion-drained-a-record-us991-2-billion-in-illicit-financial-flows-from-developing-economies-in-2012/" target="_blank">illicit capital</a>&nbsp;flowing out of India over a 10-year period from 2003 to 2012 has been estimated to be higher than the country's total income tax collection during the period itself. While everyone agrees that the menace needs to be curbed, solutions are difficult to come by. Combating the problem requires negotiating a complex maze of financial regulations and international diplomacy. Though Switzerland has received the most media attention, it is not the only “tax haven” where such funds are being siphoned off, there are several others. (For example, <a href="http://www.taxjustice.net/" target="_blank">Tax Justice Network</a>&nbsp;lists out 73 such jurisdictions).<br /><br />In 2007, evidence of deposits of more than US $ 8 billion surfaced in the UBS Zurich accounts of Hassan Ali Khan alone. The inaction of the Manmohan “Sin” Government in cases such as these led to the landmark Supreme Court order in July 2011 forming a Special Investigation Team (SIT) to investigate and bring back black money. The SIT was formed immediately after Narendra Modi government took charge in May 2014.<br /><br /><div class="MsoNormal"><o:p></o:p></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-7fhDgNMRyww/VJWZBPZrgmI/AAAAAAAACaY/NQFlJse7NJE/s1600/Court%2BOrder.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-7fhDgNMRyww/VJWZBPZrgmI/AAAAAAAACaY/NQFlJse7NJE/s1600/Court%2BOrder.jpg" height="307" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The landmark Supreme Court order forming the SIT came in a case filed by Ram Jethmalani &amp; Others</td></tr></tbody></table><br /><b>The SIT on black money</b><br /><br />The Terms of Reference of the SIT (available&nbsp;<a href="http://egazette.nic.in/" target="_blank">here</a>) are wide and far-reaching. The SIT is charged with the responsibility and duty to investigate and prosecute all instances of stashing of unaccounted money in foreign bank accounts, investigate and prosecute activities which are the source of such money and to prepare an action plan for the future. The SIT is headed by former Supreme Court judges and has heads of virtually all national investigating agencies such as IB, RAW, CBI, ED, DRI, NCB, FIU etc as its members. It reports directly to the Supreme Court. All organs of the Central and all State governments, such as agencies, departments, constitutional bodies etc have been ordered to co-operate with the SIT. The SIT is also empowered to re-open past cases where investigations have been completed and charge-sheets filed.<br /><br />Effectively, the issue of black money stashed abroad is now outside executive control and owned by the SIT. It is the SIT that has to deliver concrete results, not just in terms of giving recommendations for the future (which is the easy part) to pre-empt generation &amp; stashing away of money, but actually getting back what has been lost and prosecuting those involved. The SIT report is awaited. But it is pertinent to note that even the ToR of the SIT or the Supreme Court order which led to its formation (available&nbsp;<a href="http://judis.nic.in/" target="_blank">here</a>) does not specifically charge it with "bringing back" the siphoned off money.<br /><br /><b>What can be done</b><br /><br />Clearly, the fight against black money needs dramatic solutions and out-of-the-box thinking. Suggestions such as banking transaction taxes, annulment of high value notes, stringent regulations and even amnesty schemes have been suggested from time to time. While each of them have their own merits and demerits, the one I have found the most actionable has come from “super spy” Ajit Doval, presently the India's National Security Advisor. In a blog post in 2011, <a href="http://ajitdoval.blogspot.in/2011/09/indias-plundered-money-abroad-can-we.html" target="_blank">Doval writes</a>:<br /><br /></div><div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;"><div style="text-align: justify;"><i><span style="font-size: 9px;">"...</span>India must pass a penal law declaring itself as the sole owner and beneficiary of all Indian monies, assets and bank accounts held abroad by or the dependents of Indian nationals without due declarations to the Indian authorities. On the strength of such a law, the Government of India can ask world governments and foreign banks to recognize Indian government as the beneficiary of undeclared wealth and freeze the accounts till owners of the wealth are able to prove that they had acquired it by fair means and from legally valid sources....</i></div><div style="text-align: justify;"><i><br /></i></div><div style="text-align: justify;"><i>...Government of India should register an omnibus criminal case against suspected unidentified persons who have been indulging in criminal activities and unauthorizedly transferring money to tax havens abroad.&nbsp; This would enable the Government to get assistance of foreign police and investigating agencies for gathering evidence and information. It will empower the government to approach different banks abroad, as also the concerned governments, for information regarding the money trail as they pertain to criminal cases..."</i></div></div><div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;"><div style="text-align: justify;"><o:p></o:p></div></div><div class="MsoNormal" style="text-align: justify;"><br />In other words, we should "nationalize" all such assets lying outside India and put the onus on their owners to prove that the assets are legitimate.&nbsp;<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">When it comes to recovering what has already been plundered, only such drastic solutions can give some decent results. Even then, we can only hope to recover only a part of the stolen wealth, nothing more can be expected. <br /><br /><b>The economic solution</b><br /><br />Enforcement and policing is never a sound and harmonious solution. For that, the problem has to be pre-empted.</div><div class="MsoNormal" style="text-align: justify;"><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"></div><br />Tax rates have to be kept as low as possible, so that tax avoidance ceases to be profitable. This means the government keeps its expenses as low. The government should withdraw from economic activities, restricting itself to the bare minimum such as maintenance of law &amp; order and running the judicial system. This reduces the scope for bribery and crony capitalism. In India, much illicit wealth has been generated from bribes paid to twist policies or government decisions. Scope for discretionary decision making aids corruption.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br />Global economies are slowing, and profitable investment opportunities are shrinking abroad. India is among the fastest growing economies in the world today. If business climate in India is improved, incentive to retain money abroad reduces. This again calls for dismantling bureaucratic controls, improving the rule of law and installing a quick and efficient grievance redressal system.<br /><br />Despite all this, a few black sheep will still exist. For them heavy penalty should await. Investigations should be fast, and justice delivery certain. Police and judicial reforms therefore should be on top of the government's agenda.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br />If all this is done, the problem of “black money stashed abroad” can be mitigated. But for now, the suitcases Mr. Jaitley would be carrying are likely to be largely empty.<br /><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-22580334682487574352014-01-26T10:20:00.000+05:302014-01-26T10:20:35.320+05:30The ABCD of India’s political landscape<div dir="ltr" style="text-align: left;" trbidi="on"><div align="center" class="MsoNormal" style="mso-outline-level: 1; text-align: center;"><br /></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">This Republic Day, a basic lesson on the country’s current political landscape...<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">A is for Aam Aadmi Party, the newest kid on the electoral block. Starting out as an anti-corruption movement, AAP sprang a surprise in the Delhi Assembly Elections. The sheer novelty of its approach has now put them at the centre of the country’s political discourse. How well the approach works in the long run remains to be seen.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">B is for BJP, the principle asylum of India’s right wing political thought. The party attracts those who believe everything was hunky-dory in the Land of the Rajas &amp; the Maharajas, until the successive invasions of the Moghuls and the Europeans deprived Bharat of her wealth &amp; prosperity.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">C is for Congress, the party that has governed the country for a major part of its existence. It has worn different garbs at different times in history, toying with socialism in the 60s &amp; 70s, free market - liberalism in the late 80s &amp; 90s and back to welfarism in the 21<sup>st</sup> Century.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">D is for - what I call - the Dodos of Indian politics. These are parties other than the above three, mainly regional in existence. Most of them have little economic ideology and depend on narrow populism or chauvinistic programs to sustain their existence. 14 years into the 21<sup>st</sup> Century, many of them do not even have functional websites, let alone embrace emerging media and reach out to the voters of tomorrow. As the results of recent State elections show, most of these are facing extinction.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/--kS3Jbz18pI/UuSTLYoe-KI/AAAAAAAABMM/Gurap5Q9aco/s1600/IMG_1639.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/--kS3Jbz18pI/UuSTLYoe-KI/AAAAAAAABMM/Gurap5Q9aco/s1600/IMG_1639.JPG" height="266" width="400" /></a></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">E is for Elections, that grand celebration of democracy that gives the people a chance to speak &amp; be heard. Half the world population does not live in a democracy, and we are proud we have achieved a matured democratic infrastructure that allows for smooth transfer of power.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">F is for Freedom, our most valuable possession. Freedom to live our own lives, the way each one of us wants to. It is upon us to use it responsibly and for the benefit of all, without malice and nuisance to others.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">G is for Gandhi, the dominant name in India’s politics for the last hundred years. The original one lived a simple life; preached non-violence, truth and honesty. Later came the fake ones, whose contribution is more controversial.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">H is for History, that which teaches us our lessons. It is upto us to ensure that mistakes of the past are not repeated in future.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">I is for Independence, what India achieved on 15<sup>th</sup> August 1947. It means we are now the masters of our own destiny, and cannot blame others for what happens to us. Let us take it upon ourselves to put our house in order and make this a wonderful place for our future generations.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">J is for Judiciary. An independent &amp; efficient judicial system is a key pillar of any democratic set up. Despite some ups &amp; downs, Indian judiciary has largely stood the test of time in its independence, though its efficiency leaves much to be desired.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">K is for <i>Kursi</i>, the seat of power which is what all the fight is for! It is the magnet that attracts people to this game and can bind even the most disparate group of elements together. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">L is for Listening, an ability that seems so short in supply among political class. A Parliamentary debate is in progress? We don’t care. Listening to the people? What is <i>that</i>?<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">M is for Media. A free &amp; vibrant media is often considered the fundamental proof of an open society. The advent of technology and social platforms has added a new dynamic to this channel in recent times, handing even ordinary people an unprecedented power to be seen and be heard.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">N is for Nexus, that invisible thread that binds politicians, bureaucracy, industry and the media together. You cannot see it easily, but know it exists!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">O is for Outrage, the only thing which makes our political class sit up and take notice. You need an outrage against corruption, outrage against rape, outrage against terrorist attacks, outrage against anything, if something has to happen. Until then, things don’t move.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">P is for the Public, the fools who follow the rules. Come election season, every politician swears by them but soon forgets once elected to power. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">Q is for Quotas, supposedly the ticket to electoral success. Create a quota; create a vote bank, so goes the conventional thinking in the political class. Caste, class, religion, age, gender, language, even profession, location and what not - you name it and there is some quota somewhere on that basis!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">R is for Rule, that misnomer used to describe what the people we elect are supposed to do. I suggest we use ‘Govern’, which is the right word, as in, ‘BJP <i>governs</i> Goa’, ‘Congress <i>governs</i> Karnataka’, and so on. Not “…rules…”<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">S is for Scam, that recurring theme in our political discourse. From fodder to satellites, there seems to be one in everything.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">T is for Taxes, the legitimate hard-earned money that is forcefully diverted from productive purposes to run the government. What happens to it afterwards remains a mystery!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">U is for Unity, Unity which every party preaches, even as it goes around dividing the people.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">V is for Vote Bank, that mythical entity that is supposed to keep you permanently in power. But as many are finding out lately, it may not actually exist!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">W is for Wealth, what the Gods have bestowed on this nation – a very hospitable climate with an abundance of rain, water, sunshine, air and plenty of natural resources. It is upto us to make the best of it.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">X is for the eXception! Once in a blue moon, a boy who delivered newspapers goes on to build missiles and even becomes the President. Untarnished, unblemished by everything around him. That the system allows him to reach such heights is what gives me hope.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">Y is for Youth, the ‘demographic dividend’ of having one of the youngest populations in the world. This is the principle strength of India, the youth who will shape its destiny, its future. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">Z is for Zero. Zero tolerance for corruption, zero tolerance for mis-governance, zero tolerance for crime. This is what the youth of this country should look for, when they vote in the coming elections! <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; line-height: 115%;">Happy Republic Day!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com1tag:blogger.com,1999:blog-185980402423271988.post-82892145503097353982014-01-05T17:07:00.001+05:302014-01-05T17:07:47.733+05:30Minimum Wage Laws: Substituting low wages with no wages<div dir="ltr" style="text-align: left;" trbidi="on">What do Minimum Wage Laws actually do to the people they try to protect? Click <a href="http://www.moneylife.in/article/minimum-wage-laws-substituting-low-wages-with-no-wages/35813.html" target="_blank">here</a>&nbsp;to read my article on the subject.<br /><br /></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-47700603026230363202013-12-27T18:05:00.001+05:302013-12-27T18:05:30.336+05:30Cluster Development: A medicine worse than the disease<div dir="ltr" style="text-align: left;" trbidi="on">The Maharashtra State Government has tabled a scheme for Cluster Development of housing projects in Mumbai. Read my views on why the scheme is harmful and needs to be scrapped&nbsp;<a href="http://www.moneylife.in/article/cluster-development-a-medicine-worse-than-the-disease/35729.html" target="_blank">here</a>.</div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-70518486011086040372013-12-06T21:02:00.004+05:302013-12-06T21:02:42.799+05:30Zero marks to the Zero Loss Theory<div dir="ltr" style="text-align: left;" trbidi="on"><div align="center" class="MsoNormal" style="mso-outline-level: 1; text-align: center;"><br /></div><div class="MsoNormal" style="text-align: justify;">I was glad to come across the news that Shri. Kapil Sibal, Union Minister for Communications &amp; I.T. has joined Twitter.&nbsp; It is good that India’s political class is slowly but surely taking to the Social Media. This will help the political class and the citizenry to engage fruitfully with each other and bridge the gap between the two. Whether Shri. Sibal likes it or not, his name has been permanently etched in public memory with the Zero Loss Theory. Soon after Shri Sibal came on board, he was confronted with a question on the same: “Sir, please explain the zero loss theory in 140 characters” said a tweet. To this, Shri Sibal replied with the following: “Expenditure – Earnings = Loss, if expenditure is greater than earnings. Have you calculated earnings to calculate loss?” </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">One may recall that Shri. Chidambaram, the Union Minister of Finance also made a similar statement in the Coal Scam discussion. “…if the coal has not been mined, if coal remains buried in Mother Earth, where is the loss?” he was widely reported to have said. What Shri Sibal or Shri Chidambaram were saying is that since the beneficiaries of the alleged largesse have not monetized the giveaway, the spectrum or the coal mine, there is no loss. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In other words, <i>if your car is stolen, there is no loss until the thief sells the car.<o:p></o:p></i></div><div class="MsoNormal" style="text-align: justify;"><i><br /></i></div><div class="MsoNormal" style="text-align: justify;">When put this way, the defect in the Zero Loss Theory becomes immediately apparent.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">There is another related argument that is often made that needs to be demolished. It goes like this – ‘since government is not a profit making entity, assets need not always be sold to the highest bidder. Cheap spectrum can make cheap telephony available to the masses, and cheap coal can provide cheap electricity.’ This line of argument has even been made by the Prime Minister himself in the past. How far is this thinking valid?</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The government owns nothing. It is a Trustee of the assets that belong to the citizens. Every sale of an asset below market price is a loss to the citizens and a net gain to the new asset owner. Once the asset is sold, neither the government nor its people control what the asset owner does with it. Hence selling assets cheap “in public interest” only results in losses that are certain and upfront, while the supposed benefits remain uncertain and in the future. The fallacy of this approach has been amply demonstrated in both the 2G and the Coal Scams.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Does this mean the government should always maximize revenue and profits? </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">No. Here, one needs to distinguish between selling assets and providing services. For example, the Railways can justifiably run at a loss – <i>anyone who buys a ticket can benefit from the subsidy. The benefits cannot be monopolized. The assets remain with the government while the public benefit from the services. </i>But the same cannot be said about selling spectrum or a coal mine, where neither the government nor the people can control what the asset owner does once the ownership is transferred. However, many a times this crucial point is missed.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><br /><div class="MsoNormal" style="text-align: justify;">I have not checked how many followers Shri. Sibal has acquired over Twitter. Does that mean he has Zero followers. Or does he, really?</div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-42672029221790240092013-09-08T09:55:00.000+05:302013-09-08T09:55:34.609+05:30Three myths about the "growth" debate<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">If one reads the country’s pink press or listens to the ‘experts’ appearing on television regularly, one might wonder why, with so many brains around to solve the country's problems, the problems are still there and not going away. The answer for this is not difficult to see. Given below are three common myths that surround the debate, making problem solving exercise an exercise in futility:<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Myth # 1: GDP growth is utopia<o:p></o:p></span></u></b></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">No other economic statistic is probably as abused as “GDP growth”. Very few understand what (GDP) ‘growth’ is, and even fewer the limitations of this number. That is precisely why, probably, every politician worth his salt finds it a handy tool to misuse. GDP, or Gross Domestic Product, is the sum total of all output of <i>final</i> goods and services produced in the country in a given period. GDP growth then, is the <i>increase</i> in this output, adjusted for inflation. GDP growth shows how much <i>more</i> the country has produced compared to a previous period, usually the year. All this is fine.&nbsp;</span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">However, it is rarely discussed that:</span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">What matters is not the absolute GDP growth but <i>per capita</i>&nbsp;growth, especially when comparing GDP figures between two different countries. For example, U.S. GDP grew by 2.78 % between 2011 and 2012, while India’s GDP grew at 4.99 %, faster than that of the U.S. However, India’s <i>per capita GDP</i> actually <b>fell</b> from $ 1,534 in 2011 to $ 1,489 in 2012 while U.S.’ per capita GDP grew from $ 48,113 to $ 49,965. (Source: <a href="http://data.worldbank.org/indicator/NY.GDP.PCAP.CD" target="_blank">World Bank</a>). Indians were thus worse off than they were the previous year. All <a href="http://www.firstpost.com/economy/reality-check-dear-fm-india-is-not-the-worlds-second-fastest-growing-economy-994361.html" target="_blank">talk</a>&nbsp;about India being “…one of the fastest growing economies in the world…” is thus meaningless, because India's <i>per capita</i> figures almost invariably turn out to be much worse.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">Then there are other factors to be considered such as the composition of this GDP growth. In India, government buys food grains every year at higher and higher prices through an administrative fiat (MSP) with tax payer money which then <a href="http://articles.timesofindia.indiatimes.com/2013-08-24/india/41442954_1_storage-capacity-private-traders-tonnes" target="_blank">rots</a>&nbsp;in government godowns. This production counts as GDP, but it never reaches the consumer. With his <i>remaining</i> money, the tax payer ends up buying the remaining foodgrains in the open market at inflated prices, because so much of legitimate supply has gone out of market. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">In a healthy economy, higher GDP figure should be supported by two other characteristics – increase in productivity and increase in job creation. India’s average GDP growth between 1999-00 to 2004-05 was 5.76 % and between 2004-05 and 2009-10 was 8.73 %. But the number of jobs created between 1999-00 to 2004-05 was 60.70 million whereas between 2004-05 to 2009-10 was just 2.72 million (Source: Planning Commission).<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">GDP growth is thus just a statistic that needs to be taken with a <a href="http://www.bloomberg.com/news/2013-01-30/gdp-an-imperfect-measure-of-progress.html" target="_blank">fistful of salt</a>. <b>GDP growth is an <i>outcome</i> of a healthy economy, but it does not necessarily constitute <i>proof</i> of one.</b><o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b></div><div class="MsoNormal" style="text-align: justify;"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Myth # 2: The growth – inflation paradox<o:p></o:p></span></u></b></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">This probably is the biggest myth of them all – <i>that the Central Banks are perpetually facing a Catch–22 situation</i>: if rates are reduced (or liquidity increased, which has the effect of lowering rates) to propel growth, inflation flares up and if rates are raised (or liquidity tightened) to control inflation, growth suffers.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">Let’s get this straight here – Bank lending and borrowing (i.e. deposit) rates move in tandem. If you want lending rates to come down, deposit rates need to be lowered too. And deposit rates cannot be delinked from inflation rate. Interest is the time value of money. The way an economy grows is like this: interest rates get <b>high enough</b> to encourage savings; this encourages people to save more. The banks (and others such as insurance &amp; pension funds etc) become flush with money. They then compete among themselves to lend, which brings down lending rates. This in turn encourages more consumption and capital investment, promoting growth.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">Lower interest rates are thus a <b>result </b>of increased availability of capital, which in turn is a result of increased savings, which in turn is a result of higher income and low inflation! That’s how low interest rate induces growth. All the economies which have shown high growth rates in the past, such as Singapore or China or even India have done so on the back of a high savings rate. Countries which tried to grow through excess leveraging, such as those in Europe or the U.S. are facing problems today.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">What happens if inflation rate is higher than the rates of return savers get (the so-called <i>negative real interest rate</i>)? If inflation is high, disposable incomes fall; inducing people to cut down on discretionary consumption. There is also a flight of capital to hard assets and speculative investments, causing asset price bubbles.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Myth # 3: Central Banks can cure all economic ills<o:p></o:p></span></u></b></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">The media pays too much attention to Central Bank actions. The Central Bank can only do this much, and nothing more. It has the mandate to maintain the value of the currency, to oversee (but <i>not</i>to run) the banks and to run the credit &amp; payment system in the country. The fiscal policy, the trade policy, the industrial policy, the law and order, the availability of manpower and requisite skill sets, the legal framework, the ease of doing business – there are several factors that impact how the economy performs. Most of these are under government influence. Most of the times, governments make things worse, in the guise of ‘regulating’ them. You just can’t expect the Central Bank to have a magic wand which will make all sins of the government disappear and power the economy full throttle.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">In a 2012 World Bank ranking of 185 countries on “<a href="http://www.doingbusiness.org/rankings" target="_blank">Ease of Doing Business</a>", India ranked 132<sup>nd</sup>. The rankings rate countries on parameters such as starting a business, dealing with construction permits and enforcing contracts. Here is the latest example - a bill introduced in Indian Parliament to “regulate” <a href="http://www.prsindia.org/billtrack/the-street-vendors-protection-of-livelihood-and-regulation-of-street-vending-act-2012-2464/" target="_blank">street vendors</a>&nbsp;will soon make it impossible for anyone to even sell peanuts&nbsp;on the streets. And we expect Central Bank to promote growth!<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">When you bust these myths, most of what appears in the pink press or the business channels on how to promote growth will cease to make any sense.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;;"><br /></span></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com2tag:blogger.com,1999:blog-185980402423271988.post-56393219666590038772013-08-27T13:14:00.002+05:302013-08-27T13:17:57.272+05:30A bridge to nowhere<div dir="ltr" style="text-align: left;" trbidi="on"><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as&nbsp;<i>"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."&nbsp;</i>The central bank, of course has other functions in addition to this, such as the manager of foreign exchange, acting as the banker to the government and a&nbsp;<i>lender of the last resort</i>&nbsp;to the banking system. Maintaining price stability however, has always been seen as the primary objective of any Central Bank in the world. As the incumbent Governor of the Reserve Bank Dr. D. Subbarao prepares to demit office after an eventful tenure, I took a look at his monetary policy actions and the impact they have had on some key indicators in the country.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><br /></div><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Subbarao’s tenure at the Reserve Bank has been one of the most challenging of any RBI Governor’s in recent times. Within days of his taking office, financial crises struck the economies of the West. Giant institutions collapsed.&nbsp; Credit markets froze. World trade came almost to a halt. Stock markets crashed. Commodities plunged. The recession that followed in the U.S. and Europe has been described as the worst since the Great Depression of 1932. Though not a direct party to the tumultuous events unfolding in the developed world, a rub-off effect on India was inevitable.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><br /></div><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Subbarao’s tenure has also coincided with a leadership crisis at the centre in New Delhi. In the last few years, a profligate UPA-II sunk itself neck deep in corruption, mega scams hit the headlines, crony capitalism peaked, “policy paralysis” became the buzzword and economic reforms that started in the 1990s reversed, ironically by the same man who was hailed as the architect of those reforms earlier. A <a href="http://chandragupta-acharya.blogspot.in/2012/06/why-socialism-fails.html" target="_blank">welfare state</a>&nbsp;has emerged.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt; text-align: justify;"><br /></div><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">In such an environment, managing the country's monetary policy can be no easy task. The policy under Subbarao followed alternate bouts of easing and tightening liquidity in 'baby steps' of 0.25 to 0.50 percent each at intervals of a few months at a time.</span><br /><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br /></span><br /><table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable"><tbody><tr><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 140.25pt;" valign="top" width="187"><div align="center" class="MsoNormal" style="margin-bottom: 0pt; text-align: center;"><b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Phase</span></b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;"><o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 99pt;" valign="top" width="132"><div align="center" class="MsoNormal" style="margin-bottom: 0pt; text-align: center;"><b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Over a period</span></b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;"><o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 222.75pt;" valign="top" width="297"><div align="center" class="MsoNormal" style="margin-bottom: 0pt; text-align: center;"><b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Action</span></b><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;"><o:p></o:p></span></div></td></tr><tr><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 140.25pt;" valign="top" width="187"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Eased liquidity, lowered rates<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 99pt;" valign="top" width="132"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Oct 08 – Feb 10<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 222.75pt;" valign="top" width="297"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Reduced CRR by 4 %<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Reduced Repo by 4.25 %, Reverse Repo rate by 2.75 %<o:p></o:p></span></div></td></tr><tr><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 140.25pt;" valign="top" width="187"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Squeezed liquidity, raised rates<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 99pt;" valign="top" width="132"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Feb 10 – Jan 12<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 222.75pt;" valign="top" width="297"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Raised CRR by 1 %<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Raised Repo, Reverse Repo rate by 3.50 %<o:p></o:p></span></div></td></tr><tr><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 140.25pt;" valign="top" width="187"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Eased liquidity, lowered rates<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 99pt;" valign="top" width="132"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Jan 12 – May 13<o:p></o:p></span></div></td><td style="padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in; width: 222.75pt;" valign="top" width="297"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Reduced CRR by 2%<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12.0pt; mso-fareast-font-family: &quot;Times New Roman&quot;;">Reduced Repo, Reverse Repo rate by 1.25 %<o:p></o:p></span></div></td></tr></tbody></table><br /><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%; text-align: justify;">What effect, if any, have these steps had on the key indicators stated while embarking on these policy actions? Let us take a look at some of them</span><br /><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-PzgsMVqiqxA/UhgXeeVQ0KI/AAAAAAAABJ0/TYpwHGCO0Ts/s1600/art0003.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="275" src="http://2.bp.blogspot.com/-PzgsMVqiqxA/UhgXeeVQ0KI/AAAAAAAABJ0/TYpwHGCO0Ts/s1600/art0003.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Consumer prices have risen more than 50 % in less than five years</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Consumer prices have risen continuously, at almost a uniform rate <a href="http://chandragupta-acharya.blogspot.in/2012/04/returns-or-inflation.html" target="_blank">in the last five years</a>. Between October 2008 and June 2013, prices (as indicated by CPI-IW) are up more than 50 % i.e. more than ten percent per annum compounded. Whether Subbarao was tightening credit or easing liquidity, it has clearly had little impact on consumer prices.&nbsp;<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><br /></div><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-YPDevC6wuhU/UhgZJy0GimI/AAAAAAAABKA/W8W08DAKh1Y/s1600/art0001.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="316" src="http://3.bp.blogspot.com/-YPDevC6wuhU/UhgZJy0GimI/AAAAAAAABKA/W8W08DAKh1Y/s1600/art0001.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Rupee has depreciated from Rs. 48 to a $ to Rs. 65 in less than 5 years&nbsp;</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">After an initial period of stability, the currency has collapsed. Especially from August 2011 when it was trading at Rs.45, it has been a one way street for the Indian Rupee, trading at around Rs. 65 to a dollar at the time of this writing. It is instructive to note that the Rupee broke its long term trading range (between Rs.45 to 50) in end-2011, when it was clear that the tightening cycle has ended and rates would be lowered going forward. Subbarao reversed the rate cycle with a CRR cut in January 2012.</span></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-UqekT1hHxMU/UhgcqCr6bNI/AAAAAAAABKM/vuowAVI8xfE/s1600/iip0001.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="245" src="http://3.bp.blogspot.com/-UqekT1hHxMU/UhgcqCr6bNI/AAAAAAAABKM/vuowAVI8xfE/s1600/iip0001.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Industrial production has gone nowhere in the last three years</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">If the rationale for cutting interest rates starting January 2012 was to promote industrial growth, it has clearly not worked. The Index of Industrial Production has gone nowhere in the last three and a half years - it stood at 163.60 in January 2010 and stands&nbsp;at 164.3 in June 2013. Whether Subbarao was raising rates or lowering them, industry has stagnated.&nbsp;<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><br /><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">In retrospect, vacillating</span><span style="font-family: 'Times New Roman', serif; font-size: 16px;">&nbsp;between the demand from industry for lower interest rates and the imperative to tame inflation,&nbsp;</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">monetary policy went nowhere under Subbarao. The cycle of liquidity tightening was abandoned abruptly in January 2012, ostensibly under the pretext of taming inflation. But even the meager mitigation in wholesale inflation rate never reached the end consumers. By lowering interest rates too early, Subbarao clearly jumped the gun, aiding, if not entirely causing the currency collapse.&nbsp;</span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><br /></div><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;"><b>A prolonged period of negative interest rates is the primary cause of India’s financial crisis today.</b>&nbsp;Negative interest rates promote investment in hard assets like gold and real estate at the cost of financial assets. Negative interest rates induce excessive borrowing and investment in unviable projects. Negative interest rates cause a flight of capital and depreciate the currency.&nbsp;The high inflation in recent years, and the sharp depreciation of the Rupee is a direct consequence of the RBI’s reluctance to raise rates when the situation demanded. A hawkish RBI is necessary to counter government profligacy.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><br /></div><div class="MsoNormal" style="margin-bottom: 0pt;"><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Ironically, and unfortunately, Subbarao has been blamed for precisely the opposite – for&nbsp;<i>not&nbsp;lowering&nbsp;rates </i>enough. In the media, he is often portrayed as the one taking on the mandarins of the North Block, on issues ranging from interest rates reduction to new bank licences. <b>But the symptoms of the current crisis - high inflation and a depreciating currency - prove that interest rates need to be higher and not lower than what they are</b>. Subbarao probably knew this, but in the wake of the misleading clamor for reducing rates from the industry, politicians, influential economists and the media, could not stand up to his beliefs with conviction. In the end, his policy actions could neither control inflation nor promote growth.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0pt;"><br /></div><u1:p></u1:p><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Subbarao took office in the midst of a global crisis. He is now leaving in the midst of a domestic one.</span><br /><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br /></span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">(Also read a related article <a href="http://chandragupta-acharya.blogspot.in/2013/01/RBI-raise-interest-rates-india.html" target="_blank">here</a>)</span><br /><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br /></span></div></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-17711434236190325802013-08-01T21:12:00.001+05:302013-08-03T19:11:59.005+05:30The Aadhaar Card and our "Identity" crisis<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;">Archana works for an organization that has recently introduced a new device to track employee attendance. At the time of entry and exit, members of the staff press their fingers against a biometric sensor installed in the office. The sensor matches the fingerprints with those in its database, identifies the employee and marks them present. But there is a problem. Female employees have learnt the hard way that on days when they have mehendi on their fingers – a very common occurrence in India, especially during festivals and family events like weddings – the sensor fails to recognize the employee, marking them absent.</i></div><div class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;"><br /></i></div><div class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;">Professor Chari is a retired professor who spends his time doing research and freelance journalism. He is a regular visitor at the local Public Library, which has a large collection of rare books that help him in his research. The University has recently ‘upgraded’ its systems, and introduced a biometric reader that scans the borrower’s fingerprints when membership is granted. However, there is a problem. The biometric reader fails to ‘read’ the Professor’s fingerprints, making it impossible for him to enrol. The Librarian says this is a very common occurrence with senior citizens, for which he has no solution.<o:p></o:p></i></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">These two incidents&nbsp;(names changed, stories true)&nbsp;that I came across recently drove me to attend an <a href="http://www.moneylife.in/article/moneylife-foundation-event-update-uidaadhaar-can-fingerprints-be-faked/30726.html">event</a>&nbsp;organized by Moneylife Foundation earlier this year, on the recently introduced “Aadhaar” card by the Government of India. The event was addressed by <st1:state><st1:place>Col</st1:place></st1:state>(retd.) Mathew Thomas, a former missile scientist cum civic activist, and Mr. Jude D’Souza, a forensic expert. At the event, Mr. D’souza gave a demonstration of how fingerprints can be faked, and claimed even Iris scans can be easily tampered with. Col Thomas, in his speech, <a href="http://www.slideshare.net/mathew111938/id-pp-ts-money-life-meeting-uid-aadhaar-medicine-worse-than-disease12-jan-2013">came down heavily</a>&nbsp;on the Aadhaar project and explained how the project is being pushed ahead despite its lack of Parliamentary sanction, extraordinary high cost and innumerable flaws in conception, execution and &nbsp;<a href="http://www.hindustantimes.com/India-news/NewDelhi/People-get-Aadhaar-letters-with-photos-of-trees-buildings-and-animals/Article1-1038591.aspx">implementation</a>.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Since then, I have tracked the Aadhaar project closely. The critics of Aadhaar are many, and its flaws are there for all to see - the project has no Parliamentary sanction, its cost benefit analysis has not been done, it uses questionable methods to collect its data, the accountability for breach of data secrecy is vague and unidentified, the card itself is unnecessary and adds no value, and it exposes citizens to a grave risk of identity theft. (Read <a href="http://www.moneylife.in/article/is-uid-anti-people-the-database-state-ndashpart1/30254.html">this</a>,&nbsp;<a href="http://www.thestatesman.net/news/4139-biometrics-the-story-so-far.html">this</a>&nbsp;or&nbsp;<a href="http://centreright.in/2013/03/the-uid-why-is-the-upa-reluctant-to-debate-and-legislate-i/">this</a>)&nbsp;The card is being mischievously linked to government schemes like <a href="http://www.bjp.org/index.php?option=com_content&amp;view=article&amp;id=8683:article-shri-arun-jaitley-on-qmy-call-detail-records-and-a-citizens-right-to-privacyq&amp;catid=68:press-releases&amp;Itemid=494">subsidy payments</a>, for which simpler solutions such as Electronic Transfers (e.g. RBI's ECS) already exist. It's<span style="mso-bidi-font-style: italic;">&nbsp;marketing campaign makes the deceptive claim of being “every citizen’s right”, creating a perception of value and benefit. One can understand a right to vote, a right to free speech, or even a right to subsidies and scholarships (if eligible). But a "right" to an identity card is a laughable statement! And yet, the citizen’s have lapped up the card, as if there was no tomorrow (around 38 crore enrolled at the time of writing!). I am amazed at this craving for <b>another</b> “identity” proof, without giving a second thought to what constitutes an "identity", and why identity cards exist. So let us ponder over it...</span><br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-0T8XwpFUsfw/UfUKNxhA2dI/AAAAAAAABHM/Y-6SPoSRZI4/s1600/Sample_Aadhaar.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="256" src="http://4.bp.blogspot.com/-0T8XwpFUsfw/UfUKNxhA2dI/AAAAAAAABHM/Y-6SPoSRZI4/s400/Sample_Aadhaar.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Aadhaar - A "right" to get a card that tells you who you are!</td></tr></tbody></table><br />My dictionary defines <b>Identity </b>as <i style="mso-bidi-font-style: normal;">“the fact of being who or what a person or thing is”</i>. A person’s name and face, appearance and physical features give him his identity. His character, reputation, image give him his identity. His achievements, his work, his thoughts and actions – all give him his identity. <i style="mso-bidi-font-style: normal;">"Cogito ergo sum”</i>, Rene Descartes famously said in the 17<sup>th</sup>&nbsp;Century. I think, therefore I am. That gives me my identity. People would still have their identities even if there were no identity cards.</div><div class="MsoNormal" style="text-align: justify;"><b><br /></b></div><div class="MsoNormal" style="text-align: justify;"><b>Identity Cards exist not because people need identities, but because organizations</b><b>&nbsp;need to identify people</b>&nbsp;they want to deal with. The Election Commission issues an Identity Card, because <i style="mso-bidi-font-style: normal;">it</i>needs to identify voters who are authorised to vote. National governments issue passports because <i>they </i>need to identify people who enter and exit their country. A school or college issues an Identity card because <i style="mso-bidi-font-style: normal;">it</i>needs to identify students who have been granted admission. Why the&nbsp;<a href="http://www.uidai.gov.in/">UIDAI</a>&nbsp;needs to identify anybody is beyond my understanding. It is probably the only organization in the world whose <i style="mso-bidi-font-style: normal;">sole</i>purpose is to issue Identity Cards!<br /><br /><b>Going far beyond its blatant illegality and reckless implementation, the Aadhaar project raises serious issues of citizen’s freedom, liberty and privacy</b> that are little understood by a majority of Indians.&nbsp;The government exists for the sole purpose of ensuring law &amp; order, defending the country from external aggression and providing a dispute resolution framework. People are unaware that nobody – not even the government – needs to know more about its citizens than what is necessary. For example, the Motor Vehicles Department seeks information about a person’s age, physical fitness &amp; blood group in its ‘normal’ course of business. The Income Tax Authority does not ask for your physical fitness and blood group, but may seek information about income and assets, because that is in <i style="mso-bidi-font-style: normal;">its</i> normal course of functions. The Election Commission seeks information about age &amp; residential address, but not income &amp; assets! But the UIDAI wants to know everything about everybody, and for no specific purpose!&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It should be noted that <b>opposition to Aadhaar is not opposition to technology</b>. From Stone Age to this day, mankind has progressed only because of advancements in technology. The benefits of technology in areas such as bank computerization or railway reservation systems have been there for all to see. In recent times, government departments like the Income Tax or Passport Offices have computerized their operations, bringing immense improvement in the quality of their service delivery. However, <b>Aadhaar seeks to create an integrated database</b> that will hold everything from a person’s name and date of birth, to fingerprints and iris scans, and address to bank account numbers. It<span style="mso-spacerun: yes;">&nbsp; </span>would expose citizens to a grave risk of <a href="http://articles.economictimes.indiatimes.com/2013-04-15/news/38556007_1_indian-banks-account-holders-aadhaar">identity theft</a>, and is a blatant encroachment on the citizen’s right to privacy and liberty. It would grant immense power to anybody who lays his hands on this data, and would be open to misuse (see <a href="http://www.bjp.org/index.php?option=com_content&amp;view=article&amp;id=8683:article-shri-arun-jaitley-on-qmy-call-detail-records-and-a-citizens-right-to-privacyq&amp;catid=68:press-releases&amp;Itemid=494">this</a>, esp. the last para). This includes unscrupulous employees from the related offices, <a href="http://www.mid-day.com/news/2013/jan/240113-your-aadhaar-data-is-being-misused-by-banks.htm">data collection agencies</a>, people with political power, and by consequence their relatives, associates, business partners or anyone else who is interested in obtaining this data for a consideration.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The UIDAI claims the data is encrypted at the point of collection. But we know that adding a layer of encryption does little to deter a <a href="http://www.business-standard.com/article/economy-policy/uid-will-create-a-digital-caste-system-jacob-appelbaum-113053100728_1.html">determined hacker</a>. Everything from bank websites to email accounts, defence networks to even <a href="http://vimeo.com/25118844">nuclear establishments</a>&nbsp;have been <a href="http://www.mid-day.com/news/2013/jan/150113-chinese-national-abuses-uid-to-steal-from-mans-account.htm">hacked</a>. No wonder UIDAI doesn’t even reveal whether the country’s <a href="http://articles.timesofindia.indiatimes.com/2013-03-08/india/37560968_1_aadhaar-cards-unique-identification-authority-uidai-chairman">top politicians</a>&nbsp;own an Aadhaar Card!</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">To me, Aadhaar is nothing but part of a grand scheme to create a <st1:place><b><st1:placename>Surveillance</st1:placename> <st1:placetype>State</st1:placetype></b></st1:place>. Its other elements includes the <a href="http://cis-india.org/internet-governance/blog/indias-big-brother-the-central-monitoring-system">Central Monitoring System</a>&nbsp;(CMS), the <a href="http://censusindia.gov.in/2011-Common/NPR_BME_Plan.html">National Population Register</a>&nbsp;(NPR), the <a href="http://en.wikipedia.org/wiki/NATGRID">National Intelligence Grid</a>&nbsp;(NATGRID), countless CCTVs at <a href="http://www.firstpost.com/india/delhi-metro-porn-videos-how-big-brother-is-selling-your-privacy-951083.html">every nook and corner</a>&nbsp;of the country, and every other instrument of state oppression that is used to track every step a citizen takes. Much of this is often <a href="http://articles.timesofindia.indiatimes.com/2013-07-20/security/40694631_1_phone-records-central-monitoring-system-mobile-phone">justified on the grounds of 'national security'</a>&nbsp;– in other words, the government’s own administrative failure of securing our borders and making the country safe.<span style="mso-spacerun: yes;">&nbsp;G<b>overnments exist to serve its people, not to control them.</b> Unfortunately, schemes such as these do not face popular resistance, because a majority of the people feel they have nothing to hide. But once such an infrastructure is created, it can</span>&nbsp;be misused to intimidate and subjugate people, and create a regime of oppression and injustice.<br /><br />No wonder the government is desperate to give you an Aadhaar card. Why are you desperate to take it?<br /><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com3tag:blogger.com,1999:blog-185980402423271988.post-35724614201186254802013-01-23T20:44:00.002+05:302013-01-23T20:44:52.630+05:30Why RBI needs to RAISE interest rates<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">On <st1:date day="16" month="1" year="2013">16<sup>th</sup> January 2013</st1:date>, speaking at an outreach programme of the&nbsp;Reserve Bank of India (RBI)&nbsp;at Lalpur Karauta village in the state of Uttar Pradesh, India, Governor Dr. D. Subbarao said <a href="http://businesstoday.intoday.in/story/fighting-inflation-top-priority-rbi-governor/1/191624.html">this</a>: "If you see the currency note, it is printed on it that 'I promise to pay the bearer the sum of Rs 100' and it has my signature as the RBI Governor. What does the promise and signature mean? It means that the RBI will control inflation and maintain its purchasing power". It is another matter that the stream of journalists present did not report this very important statement (see <a href="http://articles.economictimes.indiatimes.com/2013-01-17/news/36394298_1_d-subbarao-headline-inflation-policy-review">here</a>, for example) when they filed their reports on the event. Either they did not really understand what the Governor said, or did not like what they heard.<br /><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">If you read the pink press regularly, or watch one of those stock market channels masquerading as ‘business’ channels, you might be forgiven to think that the RBI Governor sits in his office holding a magic wand in his hand. All he needs to do is to waive the wand lower, and lo! All the country’s economic problems would be solved! This magic wand, the press might tell you, is called <b>The Interest Rate</b>. So much is the pressure from interested politicians, crony capitalists and the media on the Central Bank to reduce rates, that one would be inclined to believe that that’s all that is there to managing an economy. </div><div class="MsoNormal" style="text-align: justify;"><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-nxrD7jWOc1o/UPuTN4A68_I/AAAAAAAABDo/G5IG5VlTTQE/s1600/rupee+004.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="207" src="http://4.bp.blogspot.com/-nxrD7jWOc1o/UPuTN4A68_I/AAAAAAAABDo/G5IG5VlTTQE/s320/rupee+004.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Subbarao has a promise to keep - to maintain the purchasing power of our money</td></tr></tbody></table><br />The truth however, is not so simple. When it comes to the interest rates, the mainstream media is not just wrong, it is preaching <b>exactly the opposite</b>. Let us therefore be clear – beginning to reduce interest rates right now will take the country on the path of ruin.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Let us understand why I am saying&nbsp;interest rates need to be raised.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Inflation is still&nbsp;running&nbsp;frighteningly high. As per the latest figures, Consumer Price inflation (CPI) is at <a href="http://mospi.nic.in/mospi_new/upload/t4.pdf">10.56 % per annum</a>.&nbsp;Food prices have increased by 13.04 %, with several key ingredients such as oils &amp; fats (16.73 %), vegetables (25.71 %), sugar (13.55 %) rising at a much faster pace. Being official figures, even these figures may be grossly understated. Prices of several items have as much as <a href="http://articles.timesofindia.indiatimes.com/2013-01-12/mumbai/36295751_1_food-prices-procurement-price-litre">doubled in the past year</a>. The index does not even include the dramatic increase in the prices of services like <a href="http://articles.timesofindia.indiatimes.com/2013-01-19/coimbatore/36431922_1_diesel-prices-diesel-cost-road-transport">transport&nbsp;</a>&nbsp;and <a href="http://articles.timesofindia.indiatimes.com/2013-01-09/india/36236512_1_fee-hike-higher-education-secondary-education">education</a>.<br /><br />Bank lending is already growing <a href="http://economictimes.indiatimes.com/et-now/finance/deposit-growth-lags-at-11-1-credit-growth-at-15-1/videoshow/17985025.cms">faster than deposits</a>. For deposits to catch up, interest rates need to be raised. RBI has pointed this out in the last mid-quarter monetary policy review on <st1:date day="18" month="12" year="2012">18<sup>th</sup> December 2012</st1:date>. In December, borrowings from RBI’s LAF (Liquidity Adjustment Facility) reached highest level for the year at <a href="http://www.business-standard.com/india/news/banks-borrow-rs-17-lakh-crrbi-highest-in-fy13/496283/">Rs.1.70 lakh crore</a> and are still running high at almost Rs. 80,000 - 1 lakh crore this month (see <a href="http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=27983">this</a> or &nbsp;<a href="http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=27978">this</a>). To put it simply, banks as a whole are lending more than what their deposit base justifies.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>The high rate of inflation and the shortage of deposits </b>with banks clearly point to a need to raise, and not lower interest rates.&nbsp;Even the slight dip in wholesale inflation rate (WPI) from 7.24 % to 7.18 % that is being bandied around is far higher than RBI's 'comfort level' of 4 - 5 %.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Lowering interest rates ignores the interests of savers&nbsp;</b><b>completely</b><b>; it presupposes that borrowers are the only ones interested in interest rates.</b> Lowering interest rates punishes savers, rewards borrowers and encourages profligacy. An economy should be built on solid foundations of high savings rate, and not on high borrowings. If savings are high, plenty of money will be available for productive investment, and this in turn will cause rates to move lower. Low interest rates are thus an <b>outcome </b>of a healthy economy, lowering rates artificially cannot automatically lead to a healthy economy.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In its Financial Stability Report released last month, the RBI has stated that <b>low real interest rates are causing diversion of savings</b> to hard assets like property and gold. Lowering rates further will worsen this trend.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>Raising rates strengthens the currency</b>, something <st1:country-region><st1:place>India</st1:place></st1:country-region>&nbsp;badly&nbsp;needs&nbsp;to do. <st1:country-region><st1:place>India</st1:place></st1:country-region>’s foreign exchange problems are well known and need not be elaborated here. <span style="mso-spacerun: yes;">&nbsp;</span>At a time when the country is trying to attract foreign capital by opening up new sectors for foreign investment, what justifies discouraging domestic savings?<br /><br />Lowering interest rates now will worsen these trends, causing a further rise in inflation, erosion of savings, flight of deposits from the banking system and weakening the currency.<br /><br />Vested interest and sheer ignorance promotes the myth that somehow low interest rates are &nbsp;‘good’ and high rates ‘evil’. The debate in the mainstream media is so one-sided that the merits of raising the rates or keeping them high are not even discussed. The bogey of low industrial growth and high Non-Performing Assets (NPAs) is raised every time to oppose raising or justify lowering the rates. But industrial growth has been slow mainly because inflation is eating away into people’s savings, leaving people with little money to spend on other things. High NPAs have been a result of various factors like the policy mess (e.g. power sector), poor business plans (e.g. aviation) or simply, in the words of the Finance Minister himself, “<a href="http://profit.ndtv.com/news/economy/article-cabinet-approves-rs-12-517-crore-bank-recapitalisation-plan-315930">poor lending decisions</a>”, not to mention willful defaults and corruption (e.g. real estate). I have not come across any instance which points to high interest rates as the primary cause of an asset turning bad. The rates simply aren’t that high. &nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>If high interest rates are not a cause of the problem, lowering them cannot be the solution as well.</b><br /><br />The villagers of Lalpur Karuata, like the rest of us, will soon know whether Subbarao keeps his promise.</div><span class="Apple-style-span" style="font-family: Calibri;"><span class="Apple-style-span" style="font-size: 15px; line-height: 17px;"><br /></span></span></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com1tag:blogger.com,1999:blog-185980402423271988.post-31273838209944925372013-01-12T11:33:00.001+05:302013-01-12T11:33:21.435+05:30Shooting the Messenger - India's Gold Imports (Part II)<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">(In this two-part series, we look at India's gold imports in the context of its foreign exchange problems. Click <a href="http://chandragupta-acharya.blogspot.in/2013/01/india-gold-import-economy.html">here</a>&nbsp;for the first part of this article)&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><b><i><br /></i></b></div><div class="MsoNormal" style="text-align: justify;"><b><i>But, aren’t gold imports, however small, a waste of money? After all, gold has no intrinsic value.<o:p></o:p></i></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-GAK8wqrD0tg/UN6qF8uhOWI/AAAAAAAABDY/mRLVcNiXoqs/s1600/india2.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="179" src="http://3.bp.blogspot.com/-GAK8wqrD0tg/UN6qF8uhOWI/AAAAAAAABDY/mRLVcNiXoqs/s320/india2.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Fig. 3: World's Central Banks are sitting on huge Gold Reserves</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;">Neither does paper money! Let us first look at some more points of data (Figure 3). It is known that all Central Banks are holding large reserves of Gold &nbsp;as part of their foreign currency reserves. The adjacent table that&nbsp;shows that even those countries who are facing severe economic stress, are holding &nbsp;large amounts of gold as part of their foreign exchange reserves. (Even China is playing catch up and is in fact set to emerge as <a href="http://in.reuters.com/article/2012/11/08/gold-china-gfms-india-idINDEE8A706R20121108" target="_blank">the world’s largest gold importer</a>)</div><div class="MsoNormal" style="text-align: justify;"><br /></div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-jkPtIPsQ9ow/UN6jFwJ5LbI/AAAAAAAABCs/Ho59SA-ljCI/s1600/india.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="295" src="http://3.bp.blogspot.com/-jkPtIPsQ9ow/UN6jFwJ5LbI/AAAAAAAABCs/Ho59SA-ljCI/s320/india.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Fig. 4: Central Banks have become net buyers in Gold in recent years</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;">Not only are the Central Banks holding large quantities of Gold, but are increasing them further (see Figure 4). In 2012 too, Central Banks have remained net buyers of the yellow metal, as these reports suggest (<a href="http://www.bloomberg.com/news/2012-12-05/bank-of-korea-raises-gold-holdings-as-central-banks-buy-1-.html" target="_blank">click here</a>&nbsp;or&nbsp;<a href="http://www.bloomberg.com/news/2012-09-04/central-bank-gold-buying-seen-reaching-493-tons-in-2012-by-gfms.html" target="_blank">here</a>). If gold had no intrinsic value, why are the Central Banks themselves, who supposedly understand money better than us, sitting on so much gold and buying more?</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">The fact is, Central Banks understand that gold <b><i>is</i></b>money, and money does not have intrinsic value. Your currency note derives its value from the promise of the Central Bank printed on it. Gold derives its value from the value attached to it by thousands of years of human civilization. To destroy value of paper money, you just need to print more money (to elaborate on this is beyond the scope of this article, but the interested reader can refer to this excellent article on <a href="http://mises.org/daily/6294/Inflation" target="_blank">inflation</a>). To destroy value of gold, you need to change the subjective opinions of billions of people (and Central Banks) all over the world. The reader can decide what is easier. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Even India's Central Bank, which itself bought <a href="http://www.livemint.com/Home-Page/BtrypkIoTHQ1g0rYq5JNgP/RBI-to-buy-200-tonnes-of-IMF-gold.html">200 tonnes of gold</a>&nbsp;in 2009 had this to say last week: "<i>Gold is easily accessible. It is a store of value, has no credit risk and is relatively liquid thereby incentivising many households to buy gold”</i>&nbsp;(RBI's Financial Stability Report (FSR) released on&nbsp;28<sup>th</sup> December 2012).&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b><i>But gold has no cash flows, pays no interest or dividends and is risky to store.<o:p></o:p></i></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">A common argument made against gold, but gold is not an equity share at all. So aren't we comparing apples with oranges here?&nbsp;Gold is not an investment at all.&nbsp;Gold is money, gold is currency, gold is wealth.&nbsp;I would use the cash flow &nbsp;argument only to evaluate an equity share, not gold.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b><i>But of course, you can’t take a milligram of gold to the grocer to buy your stuff, right?<o:p></o:p></i></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Right. Nobody disputes the need for paper (or digital, these days) money. This article should not be construed as an invesmtent advice, nor am I saying that gold prices will continue to rise perpetually. The purpose of this article is only to highlight that&nbsp;gold imports are nowhere as problematic as they are being made out to be and&nbsp;one needs a different perspective to understand gold.</div><div class="MsoNormal" style="text-align: justify;"><br /><b><i>Conclusion</i></b><br /><b><i><br /></i></b></div><div class="MsoNormal" style="text-align: justify;">It is estimated that Indian households own more than <a href="http://www.firstpost.com/economy/indians-sitting-on-a-goldmine-and-its-worth-1-trillion-58140.html" target="_blank">17500 tonnes of gold</a>&nbsp;accumulated over centuries of civilization.&nbsp;Despite two decades of economic reforms, it is pointed out that <st1:country-region><st1:place>India</st1:place></st1:country-region>’s equity investor population has <a href="http://www.moneylife.in/article/investor-population-vanishing-investors/25276.html" target="_blank">actually shrunk</a>&nbsp;– a surprising statistic given the importance the stock markets are attached to by policy makers and the media.&nbsp;Performance of mutual funds has been disappointing, to say the least, and double digit inflation has made investing in fixed income instruments a loss making proposition. Gold and property are the only assets where Indian people have seen their <a href="http://chandragupta-acharya.blogspot.in/2012/04/returns-or-inflation.html">wealth grow</a>. Since buying property needs deep pockets, gold has emerged as the only asset which people can accumulate in small quantities. In fact, in the FSR mentioned earlier, the RBI has admitted low interest rates have caused households to shift away from financial assets to physical assets and valuables such as gold. “Gold prices have increased the most in comparison with other assets and are significantly above the movement in WPI (i.e. inflation)” it said. It has proposed inflation indexed bonds as an option, which it hopes can reduce demand for gold.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Blaming gold imports suits the political class, as it shifts the blame of <st1:country-region><st1:place>India</st1:place></st1:country-region>’s economic ills away from its own mismanagement to the Indian public. But it is for us to analyze data, ask the right questions and make intelligent judgement. Gold imports are neither frighteningly high, nor the <b><i>cause</i></b> of India's currency problems. Nor are Indians <a href="http://articles.economictimes.indiatimes.com/2012-11-15/news/35133006_1_gold-demand-world-gold-council-marcus-grubb" target="_blank">alone</a>&nbsp;in buying gold. If people are buying more gold, there are reasons for the same. Those reasons need to be addressed. Other avenues to park money need to be made more attractive. Raising taxes or banning imports will only <a href="http://zeenews.india.com/business/bullion/bullion-news/govt-asks-agencies-to-step-up-vigil-to-check-gold-smuggling_66705.html" target="_blank">encourage smuggling</a>, punishing the honest and rewarding the dishonest. Key non-gold imports, such as <a href="http://www.dnaindia.com/money/report_oil-gas-output-falls-in-nov_1782487" target="_blank">oil</a>&nbsp;or&nbsp;<a href="http://www.financialexpress.com/news/india-rejects-mahindras-proposal-for-defence-jv-with-israels-rafael/1050423" target="_blank">defence</a>&nbsp;need to be reduced by increasing domestic production.&nbsp;Exports need to be increased by controlling inflation (since higher domestic costs reduce export competitiveness). Interest rates need to be increased, and should be higher than inflation rate, in order to encourage savings in financial assets like bank deposits. Until that happens, people will continue to buy gold, and for a good reason. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><b>III</b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">President Roosevelt’s order had permanently pegged the price of 1 oz. of gold at $ 35 and committed the <st1:country-region><st1:place>U.S.</st1:place></st1:country-region>government to exchange dollars for gold at this rate with anyone on demand. After World War II, backed by gold, the U.S. Dollar emerged as the primary currency of global trade. All international transactions and agreements, no matter between which two countries and what their currencies, came to be denominated in U.S.dollars. But thanks to inflation, the dollar continued to lose its value while gold held its own. By the early 1970s, it was clear that an ounce of gold was much more valuable than the $ 35 that the <st1:country-region><st1:place>U.S.</st1:place></st1:country-region>government paid for it. The demands on America to redeem dollars for gold increased dramatically. In 1971, faced with a run on its gold, <a href="http://en.wikipedia.org/wiki/Nixon_Shock" target="_blank">President Nixon announced</a>&nbsp;that it was ending the peg of the dollar to the gold, letting it float freely in international markets. In the next 10 years, the price of gold shot up more than 10 times to more than $ 400 per ounce and is trading at $ 1650 today.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-83739945918201393092013-01-05T16:36:00.000+05:302013-01-05T16:36:13.637+05:30Shooting the messenger - India's Gold imports (Part I)<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">I</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">On <st1:date day="5" month="4" year="1933">5<sup>th</sup> April 1933</st1:date>, citing difficult economic conditions, the then U.S. President Franklin Roosevelt signed a decree. <a href="http://en.wikipedia.org/wiki/Executive_Order_6102" target="_blank">The Executive Order 6102</a>, as it was called, made it illegal for American citizens to possess gold (with certain exemptions). The Order specified a date, <st1:date day="1" month="5" year="1933">1<sup>st</sup> May 1933</st1:date> to be precise, before which all citizens were required to deposit all the gold bullion held by them with the U.S. Treasury or face heavy penalties and / or imprisonment upto 10 years. The U.S. Government would pay $ 20.67 per oz (troy ounce, i.e. 31.10 grams, the then official gold exchange rate) for the gold, the Order said.<br /><br />A few months after the Order, the President signed The Gold Reserve Act of <st1:date day="30" month="1" year="1934">30<sup>th</sup> January 1934</st1:date>, outlawing private possession of Gold and suddenly changing the price of gold to $ 35 an ounce.&nbsp;In effect, wealthy Americans, who had amassed huge amounts of gold over generations of hard work and entrepreneurship since the onset of <a href="http://www.theusaonline.com/history/industrialization.htm" target="_blank">American industrialization in the mid-nineteenth century</a>&nbsp;were short cheated for millions of dollars by the&nbsp;government in the name of saving the country. Mind you, financial markets were not as well developed in those days as they are today, and gold was one of the primary means of wealth accumulation in the U.S. at that time.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">II</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">“Steps were being taken to control the Current Account Deficit…there was a need to control gold imports…” <a href="http://www.financialexpress.com/news/more-steps-needed-to-control-gold-import-fm/1051188" target="_blank">said India’s Finance Minister Mr. P. Chidambaram</a>&nbsp;at a meeting of the National Development Council on <st1:date day="27" month="12" year="2012">27<sup>th</sup> December 2012</st1:date>. "We are worried about gold imports. It is an unproductive instrument", Mr. Raghuram Rajan, <a href="http://profit.ndtv.com/news/commodities/article-gold-linked-schemes-on-cards-is-it-a-good-idea-314855" target="_blank">Chief Economic Advisor to the Government of India</a>&nbsp;had said earlier.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Over the last few months, there has been a sustained campaign in the press about <st1:country-region><st1:place>India</st1:place></st1:country-region>’s ‘soaring’ gold imports. The government has raised taxes dramatically on gold, quadrupling the import duty rate, changing it &nbsp;from specific to ad valorem, and doubling the excise duty on jewellery as well. “One of the primary drivers of the current-account deficit has been the growth of almost 50 percent in imports of gold and other precious metals in the first three quarters of this year,” &nbsp;<a href="http://www.bloomberg.com/news/2012-03-16/india-raises-gold-import-tax-for-second-time-prices-drop-1-.html" target="_blank">Mr. Pranab Mukherjee, the then Finance Minister had said</a>&nbsp;earlier last year, before announcing the tax hikes. “I have been advised to strengthen the steps already taken to check this trend.” To cut a long story short, Indians are buying too much Gold, and that is causing problems in managing the economy, we are being repeatedly told. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It is therefore time to take a look at the numbers and check out the facts. Take a look at the data on gold imports given in figure 1 below:</div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-NxRZLb5NimM/UN6jPUh2caI/AAAAAAAABC4/ifn1ZwAAAm8/s1600/india4.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="206" src="http://2.bp.blogspot.com/-NxRZLb5NimM/UN6jPUh2caI/AAAAAAAABC4/ifn1ZwAAAm8/s400/india4.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Fig. 1: Ninety percent of India's imports are non Gold</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><o:p><br /></o:p></div><div class="MsoNormal" style="text-align: justify;">&nbsp;We observe that:</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">1. Gold imports were 9.26 % of <st1:country-region><st1:place>India</st1:place></st1:country-region>’s total imports in 2011-12. Ninety percent of India's imports are other than gold.</div><div class="MsoNormal" style="text-align: justify;">2. Imports were in the 5 – 6 % range till 2008-09 but increased after that, roughly the time when the rapid deterioration of the economy began.</div><div class="MsoNormal" style="text-align: justify;">3. There has been a dramatic increase in the price of gold in the last decade. Increase in the <b><i>quantity</i></b>of gold imported therefore, is more benign. (It is in the range of 7 - 8 % per annum)<br /><br />Gold imports have thus increased only in line with the overall growth of the economy, with only a small uptick in the last 2-3 years. They are in fact expected to come down <a href="http://www.financialexpress.com/news/gold-imports-drop-30-to-20-bn-in-aprsept/1038531">in the current year</a>&nbsp;and the next. The brouhaha around gold imports therefore does not seem justified.<br /><br /></div><div class="MsoNormal" style="text-align: justify;"><b><i>Don’t they cite some data whenever they blame gold imports?</i></b></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-rkwlvS56RmM/UN6mFEvIkHI/AAAAAAAABDI/D0XNUn1P5ZU/s1600/india3.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="260" src="http://2.bp.blogspot.com/-rkwlvS56RmM/UN6mFEvIkHI/AAAAAAAABDI/D0XNUn1P5ZU/s320/india3.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Figure 2: India's CAD started deteriorating from 2004-05 itself</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;">Most of the time, it is pointed out that gold imports are high as <i>a percentage of Current Account Deficit (CAD,</i> <i>the excess of total imports to total exports). </i>Read the Finance Minister's <a href="http://www.diamonds.net/news/NewsItem.aspx?tc_dailyemail=1&amp;ArticleID=41963">comment yesterday</a>:&nbsp;‎“Suppose gold imports had been one half of the actual level that would have meant that our ‎foreign exchange reserves would have increased by $10.5 billion,” Chidambaram said. “I would ‎therefore appeal to people to moderate the demand for gold, which leads to large imports of ‎gold.”<i>&nbsp;</i>&nbsp;<b><i>But this is a wrong metric to use, since it does not prove causation</i></b>. As &nbsp;Figure 2 shows, <st1:country-region><st1:place>India</st1:place></st1:country-region>’s current account started deteriorating as far back as 2004-05 itself, much before gold imports picked up. Current account deficit is caused not just by gold imports, but by <b>all</b> <b>imports and all exports</b>. The question is not why gold imports are rising, but why the CAD is rising. Contribution of gold imports&nbsp;<b><i>to</i></b> current account deficit is much smaller than what is made out to be. &nbsp;In 2011-12, India's total imports were USD 607.158 billion and total exports were USD 529.003 billion. Gold imports were thus only 4.95 % of the total Foreign Trade of USD 1,136.161 billion, a very small portion, compared to other imports like petroleum or defence. Overall current account deficit on the other hand, has increased at 64 % p.a. in the last 7 years.&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><o:p>&nbsp;</o:p>&nbsp;</div><div class="MsoNormal" style="text-align: justify;"><b><i>But, aren't gold imports, however small, a waste of money? After all, gold has no intrinsic value.<o:p></o:p></i></b></div><div class="MsoNormal" style="text-align: justify;"><o:p><br /></o:p></div><div class="MsoNormal" style="text-align: justify;"><o:p>We will look at these and other arguments in the next part of the article.&nbsp;</o:p></div><div class="MsoNormal" style="text-align: justify;"><o:p><br /></o:p></div><div class="MsoNormal" style="text-align: justify;"><o:p><i>(To be continued)</i></o:p></div><div class="MsoNormal" style="text-align: justify;"><o:p><i><br /></i></o:p></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-6823981984606469462012-11-25T08:32:00.000+05:302012-11-25T08:32:05.634+05:30Beyond the obvious<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">Is allowing FDI in multi-brand Retail good for the country? What is the true impact of raising diesel prices or restricting LPG subsidy on the people? Should telecom spectrum and coal mines be auctioned to the highest bidder, or should they be allocated cheaply so that the price paid by the ultimate consumer (for telephone services and electricity) is kept low? Should rail fares be raised? Should the Central Bank reduce interest rates to stimulate industry and make loans cheaper? Should the government act against airlines who fleece passengers by charging exorbitant fares during peak season? Should the government explicitly promote export oriented industries that earn precious foreign exchange? Should cheap imports from countries like <st1:country-region><st1:place>China</st1:place></st1:country-region>be banned to protect domestic industry? Is the government right in spending thousands of crores on welfare schemes like MGNREGA? Questions such as these are debated daily, and are of interest not only to politicians and bureaucrats who decide on these, but also to citizens whose lives are affected. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">How does one take a stand on all these? How does one decide what is right and what is wrong? How does one assess the impact of these decisions – beyond the immediate fallout that we can see (such as, for example, that one would pay more for diesel if diesel prices are raised)? Do these decisions have implications that are beyond the obvious? How do we know what will work out best for us in the long run?</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">“Economics in One Lesson” by <a href="http://en.wikipedia.org/wiki/Henry_Hazlitt" target="_blank">Henry Hazlitt</a>&nbsp;is a remarkable book by any means. Written in such a simple language that even a layman can understand, Hazlitt unravels the mysteries of economic decisions and their long run effects on the health of the economy and welfare in general. Hazlitt explains how markets work, how people behave, how governments decide and what they do to the very people they seek to assist. Hazlitt gives a framework that enables the reader to analyze the long run impact of such decisions, including that &nbsp;which is not so obvious but nevertheless very important.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-KHNOq0keydQ/ULBeZ6NsYGI/AAAAAAAABAw/x174YvO_8lc/s1600/book+007.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-KHNOq0keydQ/ULBeZ6NsYGI/AAAAAAAABAw/x174YvO_8lc/s320/book+007.jpg" width="205" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Hazlitt's remarkable book should<br />be compulsory reading for all</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;">The book is divided into twenty five chapters, each dealing with a distinct topic such as taxation, effects of mechanization, import tariffs, export promotion, government price fixing, inflation, and so on. Hazlitt explains the basic principles underlying these actions and the impact of these on the economic activity as a result. Hazlitt uncovers not only <i style="mso-bidi-font-style: normal;">that which is seen, but also that which is not seen</i>. In Hazlitt’s own words, <i style="mso-bidi-font-style: normal;">“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely on one group but for all groups”</i></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It is amazing how much ignorance about economic issues is prevalent even among the policymakers today. Take the following paragraph from the chapter on government price fixing, for example. You might want to read it in the context of the current mess in <st1:country-region><st1:place>India</st1:place></st1:country-region>’s Oil &amp; Gas sector, but keep in mind that Hazlitt’s small book was written in 1946! </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Hazlitt writes, and I quote, <i style="mso-bidi-font-style: normal;">“We cannot hold the price of any commodity below its market level without in time bringing about two consequences. The first is to increase the demand for that commodity. Because the commodity is cheaper, people are both tempted to buy, and can afford to buy more of it. The second is to reduce supply of that commodity. Because people buy more, the accumulated supply is more quickly taken from the shelves of merchants. In addition to this, production of that commodity is discouraged. Profit margins are reduced or wiped out. Marginal producers are driven out of business….if we did nothing else, therefore, the consequence of fixing a maximum price of a particular commodity would be to bring about a shortage of that commodity. But this is precisely opposite of what the government regulators originally wanted to do…. Some of these consequences in time become apparent to the regulators, who then adopt various other devices and controls in an attempt to avert them. Among these devices are rationing, cost-control, subsidies and universal price fixing.”</i> Hazlitt then goes on to systematically demolish each of these.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">As we all know, relying on the promise of deregulation, billions of dollars were spent on all stages of the oil &amp; gas value chain in India, from exploration to refining to pipelines to storage &amp; distribution. But the country still doesn’t have enough of what it needs. Most of the capacity in the private sector has been shut or is on the verge of closure, the public sector survives on huge doles of support from tax payer’s money. People don't&nbsp;have enough of what they want and the private producers have all but fled, all because of faulty price fixing.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It is remarkable that such a storehouse of knowledge can be crunched in such a small book and explained so lucidly. This book should be compulsory reading for all the lawmakers who decide our future, and for all of us who choose them.</div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com5tag:blogger.com,1999:blog-185980402423271988.post-50174374908965293652012-11-18T08:55:00.000+05:302012-11-18T08:55:19.345+05:30Me Mumbaikar<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">On <st1:date day="26" month="4" year="1986">26<sup>th</sup> April 1986</st1:date>, The Times of India carried a cartoon depicting a khadi-and-Gandhi-cap clad politician cautiously touching a sleeping tiger. The tiger roars back, taking the <i>neta</i> by surprise. “He’s alive!”, the <i>neta</i> exclaims, while the common man watches on. It was the story of the 1985 BMC (Bombay Municipal Corporation, then) elections, whose results had just been declared and a seemingly dormant Shiv Sena had scored a surprise victory. A picture is worth a thousand words, and so was this R.K.Laxman cartoon.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-zDC9jcgqVjY/UKetuvjaYpI/AAAAAAAABAg/wsk1XDunhqs/s1600/balT.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="215" src="http://1.bp.blogspot.com/-zDC9jcgqVjY/UKetuvjaYpI/AAAAAAAABAg/wsk1XDunhqs/s320/balT.jpg" width="320" /></a></div><div class="MsoNormal" style="text-align: justify;">Though the Shiv Sena had been formed nearly two decades earlier, it had largely remained on the periphery of the State’s politics until then. With this victory in the BMC, the Sena saw a strong resurgence, and Bal Thackeray quickly capitalized on it, swaying the local Marathi youth, hit hard by the influx of migrants and the devastating <a href="http://en.wikipedia.org/wiki/Great_Bombay_Textile_Strike" target="_blank">textile strike</a>&nbsp;by Datta Samant in 1982. The Sena has almost continuously controlled Mumbai&nbsp;since then, and when in 1995, Manohar Joshi was sworn in as the 15<sup>th</sup> Chief Minister of <st1:place>Maharashtra</st1:place>; Thackeray’s power reached its peak. (The term ‘remote control’ first came into political parlance with this very arrangement)</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Among his detractors, Bal Thackeray evoked extreme reactions. His contempt for democracy, anti-Muslim rhetoric or use of strong arm tactics made him a soft target of the pseudo-secular intelligentsia. But there is one thing Bal Thackeray could never be accused of – hypocrisy. Thackeray spoke what his heart said, and it was this very forthrightness that endeared him to his masses. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Thackeray’s success came, not because of, but in spite of, an unfriendly media. It has rarely been reported that the Shiv Sena runs one of the largest ambulance networks in the country. Its Sthaniya Lokadhikar Samiti provided jobs to hundreds of jobless youth in the 1980s and early 90s, literally pre-empting them from joining the underworld during the heydays of Mumbai gang wars. At the peak of the Mandal Commission controversy, when even the supposedly upper caste parties like the Congress and the BJP dithered, Bal Thackeray launched a scathing attack on caste based reservations, risking his political career, but staying true to the principles he believed in. <span style="mso-spacerun: yes;">&nbsp;</span>Long before Vajpayee’s Roads Revolution, the Sena – BJP government built a network of more than 50 flyovers in the city, without which city traffic would have come to a standstill today. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In later years, Thackeray tried to expand his base outside <st1:place>Maharashtra</st1:place>, shedding his pro-Marathi stance and embracing the Hindutva agenda. This earned him a large non-Marathi following within Mumbai, but the Sena could not make any meaningful dent outside <st1:place>Maharashtra</st1:place>.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Today, Thackeray leaves the Sena in a precarious state. As corruption dominates the political discourse, the Shiv Sena finds itself on a sticky wicket. Raj Thackeray’s MNS (Maharashtra Navnirman Sena) has split his Marathi <i>manoos </i>voter base down the middle. How Uddhav takes up these challenges remains to be seen.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">While most of <st1:place>Maharashtra</st1:place>’s politicians come from regions such as the Konkan, Vidarbha, <st1:place>Central Maharashtra</st1:place> or the sugar belt, Thackeray was the only leading political figure who had his roots in Mumbai.&nbsp;<span class="Apple-style-span" style="font-size: 16px;">Till the very end, Thackeray remained in Mumbai, trusting his life to doctors who belonged to the very <a href="http://www.mid-day.com/news/2012/nov/171112-mumbai-The-3-doctors-battling-for-Bal-Thackerays-life-Bal-Thackeray-critical.htm" target="_blank">faith he was accused of targeting</a></span><span class="Apple-style-span" style="font-size: 16px;">.</span><br /><br />He loved Mumbai and fought for Mumbai. For this and this alone, Balasaheb Thackeray will be badly missed.</div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com2tag:blogger.com,1999:blog-185980402423271988.post-7841724364218079182012-11-10T18:57:00.000+05:302012-11-10T19:01:05.907+05:30God's own country!<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">Back from a refreshing trip of Kerala!<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Calm and serene backwaters. Tender coconuts. Mouth-watering banana chips.&nbsp;The tempting aroma of freshly brewed coffee.&nbsp;Houseboats.&nbsp;Spices.&nbsp;Rare species of birds. <i>Kadla</i> curry with <i>Appam</i> or <i>Puttu</i>.&nbsp;Pothole-free roads.&nbsp;Disciplined traffic.&nbsp;Long winding village names, which only the Mallus can spell and pronounce!&nbsp;Freshly fried fish.&nbsp;Karl Marx &amp; Che Guevara posters. &nbsp;Clean white dhoti. <i>Uttapa</i> called as a Dosa, and Dosa simply as a plain ‘roast’! Served along with a Vada that you think is complimentary (till you get the bill, that is). A lake <a href="http://en.wikipedia.org/wiki/Vembanad_(lake)" target="_blank">so large you think it is the sea</a>.&nbsp;<a href="http://en.wikipedia.org/wiki/Mundum_Neryathum" target="_blank"><i>Mundum Neryathum</i></a>, the unique two-piece sari.&nbsp;<a href="http://en.wikipedia.org/wiki/Chinese_fishing_nets" target="_blank">"Chinese" fishing nets</a>, that actually use Portuguese technology, not Chinese! Beautiful roadside bungalows. Picturesque inland waterways. Ancient "<i>dembles"</i>&nbsp;(!) mostly dedicated to Shiva, holding some of the world’s largest treasure troves known to man. Thundering rains. A quite &amp; peaceful life. Kerala is unique. Kerala has so much to offer.</div><div class="MsoNormal" style="text-align: justify;"><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">And a lot more!<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Photogenic tea gardens. &nbsp;Majestic elephants. Ayurvedic massages. Kathakali. Honest autorickshaw-wallahs! &nbsp;The list can go on…<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">Some snippets from my recent visit...<o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-VHrCRnLWZjo/UJ4C7kWDpRI/AAAAAAAAA_U/kDY64nbZsYM/s1600/IMG_0431.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://1.bp.blogspot.com/-VHrCRnLWZjo/UJ4C7kWDpRI/AAAAAAAAA_U/kDY64nbZsYM/s400/IMG_0431.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Navigating through the backwaters...</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-GGGU3_-l4d4/UJ4DwV0_UWI/AAAAAAAAA_g/JN0bbcrA8SU/s1600/IMG_0609.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://2.bp.blogspot.com/-GGGU3_-l4d4/UJ4DwV0_UWI/AAAAAAAAA_g/JN0bbcrA8SU/s400/IMG_0609.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The houseboats and the stunning scenery is without doubt Kerala's biggest tourist attraction</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-zQ0nvveHbOk/UJ4FAz31rPI/AAAAAAAAA_o/c5ppF3bIuGU/s1600/IMG_0656.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://1.bp.blogspot.com/-zQ0nvveHbOk/UJ4FAz31rPI/AAAAAAAAA_o/c5ppF3bIuGU/s400/IMG_0656.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Mahadevar Temple at Kottayam has some stunning architecture on its walls</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-Y6Iu0L3NM2o/UJ4GD-yDrHI/AAAAAAAAA_w/jPRwOqvndTM/s1600/IMG_0752.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://3.bp.blogspot.com/-Y6Iu0L3NM2o/UJ4GD-yDrHI/AAAAAAAAA_w/jPRwOqvndTM/s400/IMG_0752.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The unique "Chinese" fishing nets at Fort Kochi</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-hpBT6fTqh6Q/UJ4HMjsvSJI/AAAAAAAABAA/TU00F1346eE/s1600/IMG_0506.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://3.bp.blogspot.com/-hpBT6fTqh6Q/UJ4HMjsvSJI/AAAAAAAABAA/TU00F1346eE/s400/IMG_0506.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Bird sanctuary at Kumarakom offers some beautiful sightings&nbsp;</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-1G7jk7onuzU/UJ4M6NvO7QI/AAAAAAAABAQ/SK4MHxSbpcQ/s1600/IMG_0521.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="http://1.bp.blogspot.com/-1G7jk7onuzU/UJ4M6NvO7QI/AAAAAAAABAQ/SK4MHxSbpcQ/s400/IMG_0521.JPG" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">A mini-Venice, locals around the Vembanad region move around in boats rather than the road</td></tr></tbody></table><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com0tag:blogger.com,1999:blog-185980402423271988.post-47321882942796943312012-08-15T16:48:00.000+05:302012-08-15T16:48:02.526+05:30India awaits freedom<div dir="ltr" style="text-align: left;" trbidi="on"><br /><div class="MsoNormal" style="text-align: justify;">History has it that Kamsa was a cruel and unjust ruler of <st1:city><st1:place>Mathura</st1:place></st1:city>. Kamsa was greedy and cunning, and imprisoned his father Ugrasena to become the King of Mathura by deceit. Kamsa aspired to rule the world, and his frequent war mongering left the peace loving people of <st1:city><st1:place>Mathura</st1:place></st1:city>harassed and exploited. When he learnt that the eighth son of his sister Devaki &amp; Vasudev would kill him, Kamsa imprisoned them both and killed each of their children as soon as it was born.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">But the eighth son, <st1:place>Krishna</st1:place>, survived.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">It is said that when <st1:place>Krishna</st1:place>was born, the doors of the prison where Devaki &amp; Vasudev were kept opened automatically, and the guards fell into a hypnotic sleep. It was <st1:time hour="0" minute="0">midnight</st1:time> and raining heavily, but a <i>Sheshnag</i>appeared from nowhere and protected Baby Krishna from the heavy rain. The raging Yamuna calmed down almost by magic, and made way for Vasudev to pass to the other side of the overflowing river. For the next few years, as <st1:place>Krishna</st1:place>grew up in Gokula, Kamsa spent all his time searching for <st1:place>Krishna</st1:place>. He lost his appetite and slept poorly at night. He could see his dream of conquering the world fade away. He got obsessed with the thought of killing <st1:place>Krishna</st1:place>, but all his attempts to assassinate <st1:place>Krishna</st1:place> went in vain. The poisonous Putana could cause no harm, and Trinavarta, the ‘whirlwind’ demon was blown away. Arishta, Keshi, Kaliya and many others fell like ninepins before the might and magic of <st1:place>Krishna</st1:place>. <st1:place>Krishna</st1:place>was unstoppable, <st1:place>Krishna</st1:place> was unbeatable. <st1:place>Krishna</st1:place>was the Supreme Being.<br /><st1:place><br /></st1:place><st1:place>Krishna</st1:place> was an idea whose time had come.</div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-oIRaEeFZbpU/UCuDFcxf4NI/AAAAAAAAA5k/XDOFJnN8OBY/s1600/national_flag.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-oIRaEeFZbpU/UCuDFcxf4NI/AAAAAAAAA5k/XDOFJnN8OBY/s1600/national_flag.gif" /></a></div><br />Today, five thousand years later, India again awaits an idea whose time has come.<br /><br /><br /></div></div>Chandraguptahttp://www.blogger.com/profile/13272014002892802203noreply@blogger.com1